Two former directors of the British retail chain BHS have been ordered by a court to pay at least £18 million to creditors due to their roles in the company's collapse eight years ago.
The court ruled that Lennart Henningson and Dominic Chandler were liable for wrongful trading, misfeasance, and misfeasance trading during their management of the famous warehouse BHS. The retailer, which fell into administration in 2016, had accumulated a billion pounds in trading liabilities and pension debts. This collapse occurred after the controversial sale of BHS by retail tycoon Sir Philip Green to Dominic Chappell, a former racing driver with no retail experience, for just £1 in March 2015.
Photo: Dreamstime.
The Collapse and aftermath
Just over a year into Chappell's ownership, BHS went under, resulting in 11,000 job losses and a £571 million pension shortfall. Sir Philip Green faced severe criticism for the sale and subsequently agreed to a £363 million cash settlement with the Pensions Regulator to address the pension scheme deficit.
Henningson and Chandler, who worked for Chappell's company Retail Acquisitions, breached their corporate duties by continuing to trade while knowing there was no reasonable chance of avoiding insolvency. As a result, each director must pay £6.5 million for wrongful trading and £5.6 million collectively for misfeasance charges. They could also face additional fines of up to £133.5 million for misfeasance trading alongside Chappell, who is himself facing claims from creditors.
Pension cuts and legal actions
FRP Advisory, acting as the liquidator for BHS, brought the case against the directors on behalf of creditors, including the government's Pension Protection Fund. Claims against Dominic Chappell will be addressed in a separate hearing this month. Chappell was jailed for six years in 2020 for tax evasion, having failed to pay £584,000 in tax on the £2.2 million he received after acquiring BHS. The court heard that he used the money to purchase two yachts, a Bentley, and a holiday in the Bahamas.
A 2016 Parliamentary Select Committee hearing stated that the collapse of BHS created many losers, including around 20,000 current and future pensioners who faced substantial cuts to their entitlements. However, the committee noted that many individuals close to the decisions that led to the collapse walked away significantly enriched despite the company's failure.
Source: www.bbc.com