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back to article Taxpayers to cough for Comet staff redundo

The last stores of the once mighty High Street giant Comet are to close by tomorrow but the saga looks set to continue, with taxpayers potentially having to step in to cover redundancy costs. Administrative receiver Deloitte, called in by the ailing retailer's parent Hailey Acquisitions Ltd on 2 November, had been holding talks …

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Anonymous Coward

OpCapita always sounds like the plan to DDoS Capita to me...

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jai
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You'd think that employees being made redundant should be considered as preferential creditors.

Certainly, they should come higher up the food chain than the administrators - if the administrators had done their job properly, they'd have found a way to cover the redundancy costs instead of leaving it for the government to sort out.

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Anonymous Coward

What's even more of a piss take is I got made redundant from Comet HO back in June in the first round and didn't get a penny of redundancy (just under 2 years service) and now my tax money might be going towards other people getting redundancy pay.

I realise I'm probably going to contribute about 3p to one person, but still, rubbish, grr!

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Anonymous Coward

You'd think that employees being made redundant should be considered as preferential creditors.

If a company goes bankrupt then redundant employees get paid the legal minimum redundancy payment "by the governemt" ... note this is the legal minimum i.e something like 1 week pay capped at ~£100 for each year of service - assuming you've been there at least 2 years.

If the employees were treated as "preferential creditors" then there's no way administrators could pay more than they were legally obliged to (i.e. what they are getting anyway) plus as creditors they'd get might only get a percentage of that if there wasn't enough cash left to cover all preferential creditors.

N.b. an effect of this is the way is some companies as they head for brankruptcy that they have several rounds of staff cuts before the final closure with the result that all the employees that are seen as not being the best get sacked earlier and leave on good redundancy packages while they keep the best workers until the bitter end and they get minimum legal ternms only

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Thanks for the explanation.

It does seem a little unjust that the owners are getting back money (when as owners they shoulder operational responsibility) whereas the government gets shafter out of VAT, Payroll taxes AND pays out the redundancy payment. Plus people having paid for goods won't be covered, yet those goods (which technically it would appear they own) are potentially being sold as assets? If they have been sold but not yet delivered then they don't belong to comet to sell? I realise that the situation is probably far more complicated but it seems grossly one sided.

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Employees are preferential creditors at least as far as unpaid wages are concerned.

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Mushroom

What really gets me:

"But unsecured creditors will gain nothing from the proceeds of administration. These include punters that paid for goods not yet delivered, landlords and HMRC."

So I've paid for something, and injected 'real' cash into a business in exchange for provision of 'real' goods or services, and that's considered unsecured credit?

But the frequently 'fictional' money injected, in this case £2 to buy the business gets £50million back?

How can this be the case? How can this be fair?

$Deity help anyone that had the temerity to pay for something in actual cash-money as opposed to getting it on a credit card on the never-never.

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Anonymous Coward

@AC 11:35

UK redundancy entitlement is fairly complex. However, our ever-loving HMRC have a handy on-line calculator if you want to play the game:

https://www.gov.uk/calculate-your-redundancy-pay

As an illustration, a 50-year old with 20 years service (the maximum that counts), earning at least £430 per week (the cap on weekly earnings) gets around £10k. At age 65, that could be £12.9k, which is absolute top whack. Your employer is not obliged to pay any more than that, even if they're staying in business.

Posting AC 'cos my (current) employer is in the statutory-only brigade and has a real attitude problem to staff.

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Anonymous Coward

wtf?

if the administrators had done their job properly, they'd have found a way to cover the redundancy costs...

No if they do there job properly, they pay of the secured creditors 1st, then everyone else 2nd, which they have done their best to do. You can polish a turd all you want, but if no one is interested, you flog what you can.

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WTF?

Subsidiaries of the owners are classed as preferential creditors?

Something wrong with the system if the company that owns them gets any money out of it!

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Here's a thought...

Isn't Deloitte's status as a preferred creditor a potential conflict of interest? It's not unreasonable to suppose there could be a situation where they are faced with a deal that offers a decent chance of paying off a large number of creditors vs. one with a slightly better chance of being able to pay off the preferred creditors only.

Obviously they do have to have preferred status or no-one would get paid for doing what I'm sure is a hard and skilled job, but are there any oversight safeguards to make sure they don't pull stunts like selling stores to friendly companies at below-market prices?

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Re: Here's a thought...

"situation where they are faced with a deal that offers a decent chance of paying off a large number of creditors vs. one with a slightly better chance of being able to pay off the preferred creditors only."

Really - care to articulate one.

Contract law and precident clearly establish who is a preferential creditor and who is not. You may not be happy with it - but everyone enters into business knowing who gets their cut when a business goes into administration and writes their supply contracts accordingly.

For me the order of precidence is currently all wrong - and empoyee's both in terms of outstanding wages, redunancy and pension contributions should get a fairer deal - but thats what our MP's are for.....

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Re: Here's a thought...

If the administrators had no way of making sure they got paid (i.e. by being a preferrential creditor), then they would not do it unless forced to by legislation.

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Re: Here's a thought...

"Really - care to articulate one"

Theoretical company A has gone into administration with total debts of £10Million. Even split £5M each secured and unsecured. Theoretical administrator B has a potential buyer in theoretical consortium C who are willing to buy the majority of the assets for £8M, totally paying off the secured debt and leaving a good chunk for the unsecured portion if they can pull together the funding to buy.

Into this scenario comes Fatcat D who makes an offer of £5.1M for only the very best assets of the dead company - but he is willing to sign on the bottom line today. This deal will collapse the value of any remaining assets as the best have been stripped off, but it will settle all secured amounts while leaving the unsecured creditors scrapping over change. Both deals have merit, and although C does not currently have the funding it is not unrealistic that they could get it within say a week. Is there anything to stop B taking the immediate, less work option that screws over the unsecured creditors?

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Anonymous Coward

I was talking to the staff

I was at one of the stores milling through the discounts, managed to pick up a Pure One Flow at a good price, and whilst there I was talking to a sale chap who had been with them for 5 years or so, he was saying that he couldn't leave because he wouldn't get his redundancy pay out. This was near the beginning of the whole sorry affair.

Why aren't redundancy terms agreed (including the level of pay) at the start of the administration process, that way staff wont be on a promise of money that they are never likely to get? I know it would mean a lot of staff walk out, but at least some of them would stay if there pay out was secured and agreed.

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Anonymous Coward

Re: I was talking to the staff

This sadly is the product of top down managment and mentalities. Of course we are talking about laws that protect property more than individuals and with that we provide so many loopholes to shaft the little people that it is now a national sport played by many companies.

Also the trend of retail companies going titsup just before xmas as apposed to in the new year as they used to is somewhat illogical and I suspect some accounting standard that helps them screw more people in a more screwy way.

But it is utterly criminal that a contract with a employee is deemed non preferentual over others, especialy when the company has clearly directly or indirectly made it clear to employee's - you must stay to get your pay kind of approach.

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Re: I was talking to the staff

"(including the level of pay) at the start of the administration process"

The whole point of it not including that provision is that it allows the firm which is already in trouble not to add it its woes.

Remember the one of the points of administration is not to liquidate the company but to allow it to continue trading in some form.

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Re: I was talking to the staff

The reason they went titsup before Christmas is because they couldn't get the stock in to cover the Christmas selling period. For example the liquidators were selling iPad 3s at 10% off original list price. Comet would have needed a stock of iPad 4s to get through Christmas, and Apple isn't going to send them any if they don't think they will get paid for them, and the credit insurers won't cover it.

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Thumb Up

Thumbs up for the redundancy pay, they really deserve it, comet killed itself and the staff don't deserve to be dumped with nothing., it is a shame they are so low down in the scheme of debtors.

People who paid and not received their goods, if you have paid on a Credit Card, then hopefully you can get them to repay you.

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Alien

Few things to point out... Opcapita was a 'secured' creditor, ergo it registered legal charges securing the 'loans it was making to the firm, not unlike the banks or any other creditor who felt security would be required given the risk. The galling part for many here is it's a bit much for the parent to secure it's risk in a trading subsidiary but Opcapita uses investors money, not it's own per say.

Administrator's get their fees paid out of recoveries and are guaranteed. Redundancy payments regrettably often fall on the shoulder of the tax-payer.

Surprised about the level of apparent recovery on retention of title. This is a veritable minefield in terms of enforcement.

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They should in principle I think consider as some firms do,paying a bonus on top of redundancy for those who stay to contract termination.After all its highly unmotivational to continue to work in a place you know is closing no matter how much work you put in.

As for the redundancy maybe its time company's had to take out some form of insurance to cover such eventualities.

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Unhappy

What a deal

They paid £2 for the company and now get back £50M now it's gone bust! That must be the deal of the century.

There is something fundamentally wrong when this sort of thing is allowed to happen. The fat cats/pigs at the trough walk away with a $h!tload of cash, just for running the company into the ground, while it is left to the rest of us (as taxpayers) to pick up the bill. I just hope they have a really $h!tty Christmas and a diabolical New Year.

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Unhappy

Re: What a deal

Yeah, you can hope....

I hoped the same when I got made redundant shortly after joining a software company that lied to me about their future stability at both interviews (well no surprise really though it was just plain dirty) and then folded owing me £4,500 in wages with kid #2 well on the way.... I wasn't pleased. And from what I could glean on facebook and linkedin the directors had a pretty nice Xmas.

Hilariously (not) the final accounts showed that the administrators managed to realise almost exactly the same amount of cash during liquidation that they paid themselves for being the administrators.

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Re: What a deal

Darty actually paid them money to take the company off their hands. The money was to cover pension liabilities, but I suspect that will be dumped on the pension protection fund.

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Flame

A sad day for me...

...in as much as I feel for all my ex colleagues still waiting to find out if they've got a job to go to after tomorrow (I worked in the warranty repair centre that hasn't as yet gone into Admin) .

However I have to take issue with the idea that Deloitte are a competent business who know what they're doing. I am one of the lucky ones with transferable skills - my time working in a workshop was a "time-out" for me and a chance t get my hands dirty again. So the moment that the bombshell was dropped (about 12 hours after it became common knowledge via Facebook) I hit the job market hard and got myself a new position and resigned from Comet in November. Fast forward to Friday last week and I get a letter from Deloitte commiserating with me having lost my job via redundancy and please fill in these forms to see what you can get from HM Gov.

I had very little respect fr the Admin teams capabilities before this (especially the way that redundancies and closures were announced on the 'net before the staff were informed) but that just takes the biscuit.

OpCapita = bunch of fly by night shysters who employed a similar group to run the company into the ground and then a bigger bunch to oversee the carve up and ensure that Mr Jackson and his cronies get their money back.

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WTF?

Re: A sad day for me...

Incidentally, worth noting too that legal charges/debentures registered in favour of Opcapita companies were 'partially' satisfied' a full week or so before Administrators were appointed.

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