Business Secretary Vince Cable is to launch a probe into the administrators that oversaw the liquidation of high street chain Comet, according to Sky News.
Cable has said that the liquidators responsible for overseeing the closure of the electrical retailer are being referred to the Insolvency Service.
The electronics retailer, which was once the second-biggest in its market in the country, collapsed in 2012 after being badly hit by the growth of online shopping. Comet was also hit by supermarkets entering the sector and its rivals exploiting online sales.
A sale in late 2011 offered some hope for the firm, but necessary payments to shareholder-connected corporate entities saw the end of the chain, with around 7,000 jobs being lost as a result.
The collapse also left the taxpayer to pick up the £50m of outstanding debt that Comet had when it fell into administration.
Areas in question
The Insolvency Service’s review is likely to focus on to two key areas, which will both analyse whether, and by what severity, accounting guidelines were breached.
The first will be to examine whether the accountants used through the administration process had a conflict of interest, due to them also being involved with the firm previously. The second area will determine whether employees were adequately consulted ahead of being told they were to be made redundant.
After the collapse, it is also reported that a number of stakeholders in the firm and those involved in the insolvency process made around £127m collectively.
Another investigation is looking at whether there are grounds that former directors of the retailer should be disqualified.
Toughened stance
The news comes following Cable’s announcement in April that he wanted reckless company directors to be hit with tougher sanctions.
The stronger stance being called for is largely a reaction to such high profile corporate casualties in recent years, with Woolworths and Blockbuster being two high-profile stores to have disappeared from the high street. Smaller business too though will be hit, with many firms likely to be caught out.
The increasing demand for outsourced accountancy services should go a long way to ensuring that companies remain compliant, however.
Such financial accounting services can also help responsible directors and business owners to better understand their business. Affording greater control and empowering more confident decision-making, the continuing economic recovery will offer profitable opportunities for firms looking to fill the holes still left by the loss of the high street’s big names.