It was recently reported on this site that, in a bid to try and turn its financial fortunes around, British Home Stores (‘BHS’) was proposing a Company Voluntary Arrangement (or CVA). However, the end of April 2016 saw the troubled department store file for administration, with alleged debts of £1.3 billion that includes a pension deficit of £571 million.

The CVA is an agreement or ‘deal’ made between a company and its creditors whereby the creditors accept a certain proportion of their debt in the settlement, typically repaid to them from future profits. However, the fact that BHS is now entering into an administrative process is an indicator that such attempts to arrive at a deal were not successful. With 11,000 jobs and 164 shops at risk, the administrators will now try and sell all or part of the 88-year-old business (which has lost ground to cheaper and more high-tech rivals), whilst continuing to trade. If a buyer cannot found, a very large brand might be disappearing from the High Street.

Whilst the Administrators will be assuming the day-to-day control of BHS, they will be reviewing what potential support there is to keep the business trading. After that, they will have three options:

• To try and rescue the company as a ‘going concern’ (meaning it can operate for 12 months without becoming insolvent); or if that is not possible
• To try and achieve a better result for the creditors than would be obtained through an immediate winding-up of the company; or if neither of these two objectives is possible
• To try and realise any assets in the company to make a distribution to creditors from any funds raised.

This will be a very troubling time for all concerned with BHS, including its employees and suppliers. If your business is affected by any of the issues raised in the above article, then a confidential discussion – at an early stage – with an experienced and qualified specialist to talk through the range of options available, may well be an appropriate course of action. Please contact us if you would like an initial consultation, free of charge.