Overview:
Sussex Bakes was a successful bakery business based in West Sussex, and supplied cakes and baked goods to a range of well-known retail and hospitality clients. The business employed around 143 people and had been trading since 2017, but it faced a tragic and unforeseen situation when its sole director and majority shareholder died unexpectedly.
With no other director in place, the business was left without anyone legally authorised to manage its affairs or make decisions. This created an immediate operational problem due to the large workforce and multiple ongoing contracts.
David Kemp and Richard Hunt from Exigen Group were appointed as joint administrators by Bibby Financial Services, one of the secured creditors, to take control. However, given the critical nature of the situation, there were always going to be limited options. After careful consideration and following failed attempts to sell the business, it was necessary to cease trading and sell assets via an auction process.
The Circumstances of Administration
Unlike most of the administrations we are part of, this case is unique because the business was seemingly more impacted by operational issues as opposed to more traditional financial issues.
Considering succession planning can be an unpleasant and challenging topic, this case brings into sharp focus the need to do so regardless.
In the matter of Sussex Bakes, there was nobody immediately able to take legal control of the business entity and this ultimately started a chain of events that would lead to the company ceasing to trade, despite best efforts to save it.
Why a Sale Could Not Be Achieved
Exigen Group marketed the business with a view to achieving a going concern sale, however, several factors made it difficult to achieve. For example, the timeframe was extremely limited and having such a large work force posed risk concerns for any incoming buyers.
Further, with the Director’s passing, there was no real figurehead to oversee a transfer of the business or to support any purchaser.
Key Outcomes Include:
- Administration provided legal governance and control following the death of the sole director.
- The business was marketed for sale as a going concern, but no buyer was found.
- All 143 employees were made redundant as a result of the Administration, but employees were assisted with their claims.
- Auctioning the assets maximised the position for creditors.
Administrator Comment
David Kemp of Exigen Group said:
“This was an unusual and difficult case, as the business did not fail in the way most people think of when they hear about an Administration.
Having a sole director is a common structure for smaller businesses, and it often works well day to day. But it does create a vulnerability that many owners don’t consider. If that person is no longer able to act, whether through illness, incapacity or death, the company can quickly find itself in a very difficult position.
If your business has a similar structure, it could be worth seeking advice on protecting it against this by appointing a second director. It does not have to mean giving away control, but it does mean there is someone who can step in if the worst happens. It’s a simple step that could make a really big difference to the outcome of a business that is otherwise successful and well run.”