Page 26 - Patisserie Valerie Teaching Note
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KPMG: Administration
Administration is used, as was the case with Patisserie
Holdings plc, when it is considered that at least part of an
insolvent business can be sold or salvaged. Administration is
a formal insolvency process where the administrator acts in
the best interests of the creditors, such as holders of
floating charges (often a bank or banks) who can force the
appointment of an administrator if the company has not
upheld the conditions of any debenture agreement.
Normally, a moratorium is placed on the company, meaning
that the company’s creditors cannot start insolvency
proceedings, or take legal action against the firm once the
procedure has been implemented.
When a firm is going into administration, the procedure and
the company are managed by the administrator, whose goal
is to restore the company to profitability if possible.
On 22 January 2019, Patisserie Valerie announced that it had
failed to secure an extension to its lending facilities and that
it was to enter administration. Patisserie Valerie is the latest
high-profile company to collapse because of fraud and
inaccurate data. The case raises some of the same issues as
the failure of Carillion, namely:
1. Quality of the audit work performed by the external
auditors.
2. Lack of strong internal controls.
3. Poor governance.