40 1GM Wednesday December 2 2020 | the times
Business
Sir Philip Green at the British Fashion Awards in 2015. One retailer was “shocked” by Sir Philip’s actions before the collapse
Sir Philip Green is facing fresh political
scrutiny after Michael Gove said that
the collapse of Arcadia was partly down
to a “problem with the management
there”.
Arcadia, which includes Topshop,
Topman, Miss Selfridge and Dorothy
Perkins, fell into administration on
Monday night, putting more than
13,000 jobs at risk.
Mr Gove, the Cabinet Office minis-
ter, said that the failure of the tycoon’s
fashion empire was “tragic”, before
adding that it was “clear that there had
been some missteps along the way”.
Mr Gove declined to say whether he
believed Sir Philip, who has spent the
past week in Monaco aboard his
£100 million yacht, should plug Arca-
dia’s pension fund.
Alok Sharma, the business secretary,
said that he would be “keeping a very
close eye” on the Insolvency Service’s
report into directors’ conduct. In a
tweet on Monday Mr Sharma said:
“Within three months the administra-
tors have a duty to file a report on di-
rector conduct with the Insolvency
Service, who will then determine whe-
ther a full investigation is required.”
Mr Sharma said that the government
“stands ready to support those affected
during this difficult period”.
Sir Philip’s knighthood, awarded by
Tony Blair for services to retail in 2006,
is unlikely to be in danger unless the
Tycoon leaves himself
open to scrutiny again
Insolvency Service recommends his
disqualification as a company director,
a source close to the Honours For-
feiture Committee said.
Sir Philip avoided a ban from serving
as a company director in the Insolvency
Service’s investigation into the sale of
BHS for £1 in 2015, a year before the
retailer collapsed. Dominic Chappell,
who bought the business from the
tycoon, was given a lengthy boardroom
ban and has since been jailed for six
years for tax evasion.
One retail industry source said he
was “shocked” that Sir Philip had
allowed Arcadia to collapse in a way
that would open him up for scrutiny
once again: “I thought he was smarter
than this. He could have sorted out
Arcadia’s pension before folding it, so
when it came to walking away he could
do so without all this attention.”
Sir Philip, once called a “visionary”
by Mr Blair, has fallen out of political
favour since the BHS debacle. During a
six-hour parliamentary grilling in 2016
he told an MP to stop staring at him
because it was “really disturbing”.
Stephen Timms, chairman of the
work and pensions select committee,
has written to the pensions regulator
and called on the Green family to make
good the pension scheme’s deficit.
Sir Steve Webb, a former pensions
minister, told The Times that political
pressure could be more effective than
legal risks in persuading Sir Philip to
plug Arcadia’s pension deficit.Ashley Armstrong Retail Editor
Pressure over Arcadia pension pledge
Regulators have come under pressure
to disclose whether £50 million in cash
promised by Lady Green has yet been
paid to the deficit-plagued Arcadia
pension scheme.
While Lady Green, who is married to
Sir Philip Green, the former chairman,
is understood to have paid more than
£50 million, she has ten months’ grace
before she legally has to make good on
her full promise of £100 million.
More than 9,000 present and former
members of the pension schemes face
cuts of up to 20 per cent in their prom-
ised benefits. The schemes entered the
assessment period for rescue by the
Pension Protection Fund after the
retail group’s failure on Monday.
Any shortfall after these expected
haircuts will be met by the country’s
5,000 other traditional pension
schemes through the annual levy that
they are required to pay to the PPF.
Lady Green, who is based in the tax
haven of Monaco, was the owner of
Arcadia until Monday. She was the
main beneficiary of a £1.2 billion
dividend that the group paid out in
October 2005.
MPs are demanding more details of
the June 2019 restructuring deal struck
between her, Arcadia, the Pensions
Regulator and the PPF, which enabled
the group to stave off bankruptcy at
that time.
Lady Green promised £100 million in
cash to the schemes. She is understood
to have already paid two tranches, each
of £25 million. She also pledged £25 mil-
lion of her property as security. A final
£50 million payment had been due in
September 2021.
In return, Arcadia was allowed to
slash the annual repair payments that it
had been due to make to the pension
schemes from £50 million to £25 mil-
lion.
The Greens are under pressure to
make sure that none of the pension
fund members lose out, with StephenTimms, chairman of the parliamentary
work and pensions committee, arguing
that there was an “unquestionable
moral case” for them to ensure that
pension promises were met.
He also has called on the PPF and the
Pensions Regulator to disclose moreabout the 2019 deal and the status of the
promised £100 million, which the regu-
lators claimed was “guaranteed”. The
Times understands that a guarantee
was made by a Monaco-based bank.
By one measure, the aggregate
Arcadia pension fund deficit was
£537 million in 2018, but more recent
estimates put it at about £350 million.
The demands for the Greens to makegood on the shortfall echo the BHS
scandal of 2015. Sir Philip sold the
struggling department stores group for
£1 in order to dodge responsibility for its
pension shortfall, the Pensions Regula-
tor later found. He eventually put in
£363 million to narrow the deficit after
pressure from MPs and the regulator,
but the 19,000 members were still
denied their full pensions.
Commercial property worth a total
of £210 million was pledged to the
pension scheme at the time of the deal,
but there are fears that the collapse in
property values could lead to write-
downs of those assets, adding to the
pension schemes’ difficulties.
A Pensions Regulator spokesman
said: “The company voluntary agree-
ment is on track and she [Lady Green]
is making the payments as required.”
A PPF spokeswoman said: “Insol-
vency events are a concerning time for
employees and scheme members and
we want to assure the members of
Arcadia’s defined-benefit pensionschemes of our protection. The robust
negotiations at the time of the CVA last
year have ensured that both schemes
are now in a better financial position.”
Mr Timms said: “There is unques-
tionably a moral case for the Green
family to do the right thing and
guarantee Arcadia’s hardworking staff
what is rightfully theirs, whatever
happens this Christmas. But the Pen-
sions Regulator must also ensure that it
is doing everything in its power to fight
the corner of the pension scheme
members.”
The trustees of the schemes, led by
Dalriada, the professional trustee
group, said: “This is obviously very dis-
appointing news for members of the
schemes. The trustees are in dis-
cussions with Arcadia and its adminis-
trators and continue to work with the
Pensions Regulator and the Pension
Protection Fund to fully understand
future plans for the business and to
ensure that members’ interests con-
tinue to be protected.”Patrick Hosking Financial Editor
DAVID M BENETT/GETTY IMAGESLady Green, who
was Arcadia’s
owner, promised
to pay £100 millionQ&A
The government has promised
to keep a “close eye” on the
insolvency process. What does
that mean in practice?
When a business goes bust, insolvency
practitioners file a confidential report
to the government’s Insolvency Service
on the conduct of directors.
It is then up to the Insolvency
Service to decide whether to launch a
formal investigation on the back of this
intelligence and whether to pursue a
ban against directors. Precious few
reports filed by insolvency
practitioners on directors’ conduct
result in sanctions against directorsand insolvency practitioners often
privately express dismay at a
perceived lack of action.
A total of 1,242 directors were
disqualified for misconduct in 2018-19,
a tiny fraction of the millions of
directors serving throughout the UK.
However, given the scale of Arcadia’s
collapse, the public interest in its
consequences and criticism of Sir
Philip Green’s conduct, the Insolvency
Service will be under severe political
pressure to take a close look at the
stewardship of the businessWhy might someone be banned as a
director and how long for?
Directors can be disqualified for a
number of reasons, such as poor
record-keeping, misappropriating
funds or assets or not paying tax owedby the business. A ban can last for
between two and fifteen years, during
which period the individual cannot act
as a director in any company
registered in the UK or an overseas
company connected to the UK. Banned
directors also must refrain from
involvement in forming, marketing or
running a companyIf the Insolvency Service decided to
investigate, how long might it take?
It can take as long as two years for the
service to secure a disqualification. The
average last year was just shy of 20
monthsIs Sir Philip Green likely to face a ban?
It seems pretty unlikely. Simply running
a company that went to the wall —
even one with very large liabilitieswhose failure has significant
consequences — is not an offence and
the concept of limited liability
expressly constrains the consequences
of failure on directors in order to
encourage free enterprise.
To pursue a disqualification through
the courts, or seek undertakings from
a director, the Insolvency Service
would need to see evidence of
significant negligence or wrongdoing
to consider pursuing a disqualification.
The service faced political pressure
in 2018 for deciding not to pursue Sir
Philip after the disastrous sale of BHS
for £1 in 2015, a year before the retailer
collapsed.
Last year the man he sold the
company to, Dominic Chappell, was
banned from running a company for
ten yearsWhat about Arcadia’s pension
liabilities?
Arcadia has an estimated pension
deficit of £350 million and there is
political and public pressure for Sir
Philip and his family to plug the gap.
While that might be the ethical thing to
do for the scheme’s 10,000 members,
Sir Philip is not necessarily under any
legal obligation to do soWhat happens if Sir Philip doesn’t
pick up the tab?
Arcadia employees’ pensions will be
largely safe as the state Pension
Protection Fund will step in. However,
in this scenario, those who had not
reached the scheme’s normal pension
age would face a cap to how much
they can receive and a 10 per cent cut
in their pensions