Aussie Retailers: Collapsing & Going Into Administration - Essay Sample

Introduction

For this assignment, the article in the discussion is "A look back at the Aussie retailers which have collapsed or gone into administration over the past few years" by Sharon Masige which was Published in an Australian media article "Business Insider Australia". In the article, Masige reviews a few Aussie retailers that have gone into administration and others that have collapsed. It is considerable to note that going into administration is when a company has been taken under an administrator's management. In this case, the administrator has to be an insolvency practitioner who is licensed. The company or business get protection from creditors who may be threatening legal action to get back their debts once it enters administration (Bradstock, 2020). This paper discusses the issue about going into administration with Jeanwest, a clothing retailer, as the main point of reference.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

The company is still growing and had around 146 stores across Australia. However, it confirmed that it would be closing 37 stores across Australia, making more than 2050 employees redundant. Twenty-one of these individuals is from the main office. The retailer that has been in operation for 48 years went into voluntary administration 15 January this year. KPMG was appointed to conduct an urgent business analysis (Carey, 2020). The business, however, intended to redeploy some of its employees and team members where it is deemed possible. The administrators cited challenges due to the tough market conditions as the primary reason for the closure that was seen across most of the stores. Also, there is a lot of pressure from the online retailers; hence it is difficult to keep up with the market competition.

Traditionally, the number of stores that enter administration go up in January. It is primarily because most of the retailers assess the figures for their sales in the wake of the vital Christmas shopping peak period. From the evaluation of the sales and other factors such as costs, the companies are either forced to close doors or continue with business as usual (Blake, 2020). Most of these decisions are normally reached after taking a lot of consideration both at the legal and ethical levels. The shareholders and the creditors also have a lot of factors to play in the whole situation. Other reasons that lead to the closure of some of the stores is what is termed as 'retail apocalypse' where many factors merge to force the businesses to unfold. Some of them include wages to the employees, expensive rent, and increase of competitors across the world, the soaring online shopping popularity, and other factors.

According to the article, there are a lot of other stores that have been forced to close due to enter administration. They include Kikki K, Colette, EB Games, Bardot, Harris Scarfe, Napoleon Perdis, Dimmeys, Ed Harry, Topshop, Gap, Esprit, Shoes of Prey, Roger Davies, Co-op bookshop, among others (Masige, 2020). Often a company like Jeanswear can go into administration after the process has been initiated by the shareholders and the directors since it is experiencing operational or financial difficulty. Any Qualifying Floating Charge Holder can instigate the administration process. The holder can be the bank or other secured lender. Also, the business can go into administration itself if it feels that its capital is at risk. Entering into administration is not a long-term solution. It is sometimes meant to give the business some 'breathing space' where various options can be found along the way regarding the future direction of the business. Administration, however, marks the beginning of the end for most the businesses and can at times be the beginning of positive outcome for the company where it can start thriving afterwards. The IP is supposed to act to the best interest for the creditors of the insolvent company regardless of the party that make appointment of the administrator.

The administration process usually takes from a few weeks to years or more. It all depends on the circumstances. The administrator is obligated to perform the duties they are required as soon as they can, making the speedy administrations to be common than others. Company administration processes are justified by the bodies that demonstrate in rescuing the company to perform any other procedures. The discussions with the IP is meant to consider the best course of administration to get the alternative course of alternatives. Formal negotiations with creditors are performed through Company Voluntary Arrangement (CVA). The only way that a company like Jeanswear can avoid going into administration is by knowing when it is insolvent and starting to take the required measures immediately. The situations where it seems imminent for the company to go into liquidation or administration, then it is advisable to approach insolvency practitioner to help in ensuring that the detrimental company outcome for the creditors and the company is achieved.

During the period when the business is in administration, the insolvency practitioner will determine if the company has the potential of successfully opening up in future. Once the company is in administration, it is the creditors who give it protection, and they are the same parties that may force a legal action to get the debts that they are owed by the business. 'Moratorium' is the legal stay when handling the business (Fenwick & Wrbka, 2016). The time of moratorium is vital for the business as it is during this time that puts together a restructuring plan.

The appointed insolvency practitioner oversees and manages the business onwards. The process of entering into administration can be intimidating, especially when it was unforeseen even though it can be the saving grace for the company. For instance, the processes and management at Jeanswear are taken by KPMG administrators meant to oversee most things within the time it will still be under administration (Masige, 2020). Retail is quite a challenging environment and needs a lot of considerations before venturing into or while undertaking the operations. As such, it will be the sole purpose for KPMG to ensure that all creditors get the best possible return for the money that was owed to them by Jeanswear. It is often possible to ask permission from the court to get proceeding against the company in administration. However, most of the claims that have propriety nature are those allowed to proceed.

References

Blake, D. (2020). "There's a lesson here": Jeanswest closing 37 stores - Inside Retail. Inside Retail. Retrieved 7 May 2020, from https://insideretail.com.au/news/theres-a-lesson-here-jeanswest-closing-37-stores-202001.

Bradstock, A. (2020). Going into Administration - Company Debt. Company Debt. Retrieved 7 May 2020, from https://www.companydebt.com/company-rescue-solutions/company-administration/.

Carey, A. (2020). KPMG appointed as voluntary administrators. NewsComAu. Retrieved 7 May 2020, from https://www.news.com.au/finance/business/retail/kpmg-appointed-as-voluntary-administrators-as-jeanswest-collapses/news-story/d74736ec150448bc1a03dc19160cf758.

Douglas, M., Bath, V., Dickinson, A., & Keyes, M. (2019). Commercial issues in private international law. Routledge.

Fenwick, M., & Wrbka, S. (2016). Legal Certainty in a Contemporary Context. Springer Singapore.

Masige, S. (2020). A look back at the Aussie retailers which have collapsed or gone into administration over the past few years. Business Insider, Australia. Retrieved 7 May 2020, from https://www.businessinsider.com.au/australia-retail-collapse-2020-1.