- Date
- 20 February 2024
Full Disclosure:
The Body Shop enters Administration
By Jaysen Sutton |
Hi Reader 👋🏽,The Story:
It’s a bad thing when a long-standing retail chain collapses three months after being acquired by a private equity firm. You wouldn’t be wrong for wondering, ‘Shouldn’t the private equity firm have been able to see this when undertaking due diligence before the acquisition?’ But maybe this was part of the plan all along?
What you need to know for interviews:
A company may enter into insolvency if it is unable to pay its debts when they become due. The directors must be careful; if there is no reasonable prospect of the company surviving, they must stop trading and consider the interests of those who are owed money (the ‘creditors’).
In this case, administration is one of the insolvency processes that are available; administrators are appointed; ideally with the goal of rescuing the company (as opposed to liquidation, which is about dissolving the company). One of the big benefits of administration is what we call a ‘moratorium’, which freezes the legal actions against a company from creditors.
Impact on Law Firms:
When companies are in financial difficulty, this is the realm of the restructuring & insolvency practices of law firms. In this case, Jones Day is the lead advisor on the administration, having previously advised the private equity firm Aurelius on the acquisition last November. The Body Shop was previously advised by Baker McKenzie when it was sold by L’Oreal to Brazilian cosmetic company Natura.
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