Page 26 - Patisserie Valerie Teaching Note

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.