Page 28 - Patisserie Valerie Teaching Note

The initial reaction to Patisserie Holdings’ problems, its insolvency
was for Luke Johnson to bail it out, temporarily by an injection of
funds. But, the blackhole was to great and becoming greater as more
information was uncovered.

At the same time as the Administrators were appointed Patisserie
Holdings was initially granted a standstill of its banking facilities

thereby protecting it from action to recover debts, and announced it
was in talks with its lenders to extend the time period of the
agreement.

A Company Voluntary Arrangement is put in place
If the company is viable but has current or historical problems that

have been solved, this option freezes all current debt, allowing time
to pay it back. The company can continue trading with the same
suppliers and company name. Typically, these arrangements last for
3 to 5 years, interest is frozen and not all of the debt is paid back.

Administration: a Court order is obtained which stops all legal

action including HM Revenue and Customs, banks, bailiffs and

suppliers. This gives time to evaluate the situation and decide
whether to keep trading, sell the business or close it down.

The Company exits the administration process and continues as a
going concern, albeit in restructured form, or

if the administration has not been able to restructure and/or find a
buyer, then the likely outcome is either a CVL, Compulsory
Liquidation or Dissolution. Patisserie Holdings were sold.

The fraud was likely to have been very sophisticated.

“The case is unusual because less than two months before

administration, investors were asked to put in money on the

basis it would be sufficient money to protect the business,

which turned out not to be the case.” (1)

These investors e.g. Luke Johnson, have now lost this

money.