Australia’s $300 billion retail industry suffered another blow today, with the UK fast-fashion retailer Topshop Australia succumbing to voluntary administration. Despite sales of approximately $90 million last year, the company is now in the hands of administrator Ferrier Hodgson who aims to restructure and provide Topshop Australia with a sustainable model going forward.
Find out more about the process of voluntary administration and the potential outcomes that can flow from this insolvency procedure.
What is Voluntary Administration?
Voluntary administration is a process which allows a company experiencing solvency issues to appoint an administrator. During this time the directors lose their power to contract, and the administrator will act for the creditors by attempting to secure the company’s assets and subsequently provide a recommendation to the creditors as to how they should proceed. The aim is to allow companies time to restructure without the pressures from creditors, suppliers and other claimants, and hopefully avoid a lengthy liquidation process.
Possible outcomes for Topshop
While the administrator Ferrier Hodgson will recommend this course of action, the outcome of Topshop Australia’s voluntary administration ultimately lies in the hands of the creditors. There are three possible outcomes creditors can resolve:
- Topshop Australia may be returned to the directors.
- Topshop Australia will be liquidated.
- A Deed of Company Arrangement (DOCA) may be issued.
What’s next for Topshop?
It is too soon to tell what the fate of Topshop Australia will be, however Myer chief executive Richard Umbers has publicly acknowledged the sought-after nature of Topshop, perhaps indicating Myer’s ongoing commitment to the brand. This is significant as Myer purchased a 25% stake in Topshop Australia in 2015.
However, with the collapse of retail brands such as Herringbone, David Lawrence, and Marcs, the industry in Australia is in an unpredictable phase. Furthermore, some retailers are bracing themselves for further disruption with the coming arrivals of Amazon and Alibaba in Australia next year.
Let us know your thoughts on the string of high profile retailers going into voluntary administration by tagging us #lawpath or @lawpath.