Begbies Traynor knits up deal for failed German yarn supplier
Administrators from Begbies Traynor have been appointed to the German subsidiary of a Keighley-based distributor of knitting yarns and patterns that ceased trading at the end of 2017, in a rare example of English administrators being appointed over a foreign company
17 Jan 2018
Lee Lockwood, director with Begbies Traynor in Leeds and Ray Claughton, director with Rushtons Insolvency Ltd in Shipley have been appointed as joint administrators of Designer Yarns (Deutschland).
The appointment was made via an application to the English Courts using the powers set out under EC Regulation 2015/848. This enables a company whose centre of main interest (COMI) is within a different EU state to that of its registration, to be subject to insolvency proceedings in the territory of its COMI.
In this case, in December 2017 Begbies Traynor partner Julian Pitts and Claughton had been appointed as joint administrators over Keighley-based Designer Yarns Ltd (DYL), a company based and registered in England. A wholesaler of wool, it had traded successfully for many years, but suffered as a result of higher costs and customers having better access to manufacturers.
The German company was a wholly owned subsidiary of DYL which was used to sell wool on the continent, but had also struggled in recent years and had been supported by DYL. When DYL ceased to trade, the German company had no financial support and no supply of wool and was, therefore, unable to continue trading.
Having been managed by the sole English director from the UK, the German staff at the company were not well placed to be able to seek German insolvency protection. Furthermore, under German insolvency rules, a large debt due to DYL from the company would have been treated as subordinate to all other creditors’ claims which is not the case in UK law. Consequently, the director and the administrators of DYL felt it was in the best interests of the company and its primary creditor to seek the application of English insolvency proceedings.
Lee Lockwood, Begbies Traynor director and joint administrator, said: ‘For English administrators to be appointed over a foreign company is a relatively rare occurrence. We were able to satisfy the courts that the German company’s COMI was in England meaning an English administration order was appropriate.
‘We are now working with the German employees and advisers within the territory to ensure statutory matters are complied with both in England and German as well as ensuring that employees in the territory are assisted and assets realised.’
Report by Pat Sweet