Clearys

Permabear · 22-07-2015 1:15pm

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seamus · 22-07-2015 3:29pm

Valid point, but it doesn't seem to be a deterrent so far.

Exit costs are not a barrier to setting up, whereas high setup costs are.

Most companies do not enter a market expecting to have to leave it again, so the potential cost of an exit doesn't factor very highly in any assessment, though I'm sure it factors in to a certain extent.

There's also the debate that if a company is pondering an entry to the Irish market on the basis of sweating some profits out and then leaving again a couple of years later, would we even want them operating here at all?

Permabear · 22-07-2015 3:48pm

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Geuze · 22-07-2015 11:08pm

Legally, you are correct, it seems all was legal.

However, most reasonable people agree that what they did should be illegal.

FreudianSlippers · 23-07-2015 10:35am

I don't think any reasonable person, with any education in business or law, would argue that the concept of separate legal personalities of companies should be illegal. There are ways within the law to ensure that situations such as this do not arise, but removing the cornerstone of our corporate legal system would be insane.

glacial_pace71 · 23-07-2015 1:36pm

Firstly, although the figures weren't officially disclosed, we know that the Gordon group of companies acquired the 30-odd million of the Guiney vehicle (Clery 1942) debt for something in the region of 60 cent in the euro. There was an undertaking at the time that Clerys would be run as a going concern.

Secondly, the splitting of Clerys into separate companies was a pure property play. It's manifestly obvious from the annual returns that the directors are barely able to maintain a pretence that the OCS Operations company could survive. So why do they fail in their duty as directors and not seek to have it wound up? Because the OCS Investment Holdings/OCS Properties/OCS Operations charade is a property play: they're waiting on the capital appreciation of the building to reach a particular point upon which to exit. In this regard the OCS Operations is required to continue, so they squint a little, bury the heads slightly in the sand, and lo! it's still a going concern. In this regard the staff and the concession-holders are a bit like the Bruce Willis line in the 'Sixth Sense', i.e. some are dead and they don't even know it. Sad to see Bennetton fork out several hundred thousand re-fitting their Clerys store when the plug was going to be pulled at some stage from late 2014/early 2015 onwards by Gordon Bros.

(See attachments and marvel at how the Directors could legally continue to sign off on the accounts. This is quite apart from the Natrium three-card trick when acquiring the various OCS companies).

Surely any hardened capitalist would be interested in viable retail businesses rather than supporting the various predators and hangers-on of the property-tariat that the Irish state, banks and certain insiders love so much but which add little/no productive value to the Irish economy. But we hear today that the Govt are looking at the sale of AIB next year, so on will go the hand-wringing about some aspects of how the current tax regime and planning process encourages property speculation over investment in productive businesses, but at the end of the day the Govt has too much of a vested interest in the property/banking business to act in Ireland's best interest.

Elsewhere on the thread there's been a number of comments to the effect that the staff "were asking for it", the old "short skirt" argument of the 1970s. There's nothing the staff on the shop floor of Clerys or its concession holders could've done to avoid this property play unfold. Even then, within Clerys itself the wider strategic decision-making of the ratio of direct sales to concession-holders, on stock rotation, whether to go mid-market or upmarket etc are all far removed from what outcomes the sales staff can affect, i.e. even if every one of them was Blake from Mitch & Murray.

Permabear · 23-07-2015 2:17pm

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Geuze · 23-07-2015 2:28pm

I don't think anybody is suggesting that separate companies within a larger group should be abolished.

FreudianSlippers · 23-07-2015 3:18pm

That's not the point - the point is abandonment of the policy of separate legal personality which someone effectively claimed should be "illegal".

andrew · 23-07-2015 3:45pm

I get that you think redundancy pay shouldn't be a thing, but given it is, how is it defensible for that cost to be foisted upon taxpayers via a tricky corporate structure? A private business has failed, and our money - not private money -has to pay for it.

Permabear · 23-07-2015 4:00pm

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andrew · 23-07-2015 4:09pm

I just don't see how it follows that if companies shouldn't have to pay this cost, that it's OK when they shirk it and the state has to pay it. If companies shouldn't have to pay it that's one thing, but the state paying when they don't pay it is another issue.

I think there are a bunch of reasons for redundancy pay to exist that appeal to the efficient functioning of the labour market, and as you well know well functioning markets are a good thing.

There are also non market based reasons to have redundancy pay. For example, I think it's nice that people aren't immediately thrown into poverty when they lose their job, even if I think that people should endevour to ensure they aren't put in that position, because poverty is really crap.

Permabear · 23-07-2015 4:17pm

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K-9 · 23-07-2015 4:27pm

The larger point is did they mislead staff, suppliers and partners like Benetton and where they an actual going concern?

If you're ok with the general principle of what they did, and don't really see much wrong with it as it was all legal and above board, well there's enough there to nit pick and sidetrack from the wider view.

andrew · 23-07-2015 4:37pm

Going by what glacial_pace71 wrote, there is a holding company and two subsidiaries, right? So in one way legally the subsidiaries are seperate but in another way, they're joined by the fact that they have the same shareholder. The distinction is pretty artificial; they belong to the same group.

Again, going by what glacial wrote, this structure was established so that the holding company could shirk it's responsibility to what are ultimately it's employees, by ensuring that upon liquidation the employing company would have no assets with which to pay redundancy.

To recitfy this situation, you don't have to overturn the legal system. You could either make the ultimate shareholder responsible for the debts of it's subsidiaries when those debts relate to redundancy payments. Or, becasue that's messy, you could make companies engage in some sort of financial transaction (e.g. hold assets, get a letter of credit) which enable them to at a minimum pay statutory redundancy. In any case, just because something is legally correct doesn't mean that it's fair or good in any sense.

glacial_pace71 · 23-07-2015 4:43pm

I'm not going to nit-pick with you ad infinitum, as you've clearly a particular view about this set of transactions.

I've provided you with the data upon which the company directors signed off, you've decided to discount that and instead place some blind faith in a press release.
It was always about acquiring a debt at 60-odd cent in the euro, separating out the assets from the liabilities, realising the value of those assets and divesting responsibility for the liabilities. As this matter may ultimately be the subject of a legal challenge I'm not going to continue here with providing Natrium and/or its cheerleaders with any fig leaf under which to hide from the staff or concession-holders.

FreudianSlippers · 23-07-2015 5:28pm

In fairness, I think the staff and suppliers were equally as screwed had they not stepped in during the receivership in the first place.

Godge · 23-07-2015 5:44pm

What they did was morally wrong.

Was it legally wrong? Don't know.
Was it good business? Looks like it.
Did some people get stung by sharp business practice? Yes, but is that legally wrong?

johnnyskeleton · 23-07-2015 6:53pm

Mod note

Discussing moral, economic or political wrong is fine. But determinations as to criminal liability are for a judge or jury to decide. Also, if there are ongoing high court proceedings then please dont speculate as to potential findings and stick to the reported facts.

K-9 · 23-07-2015 9:39pm

Which would suggest legislation should be brought in to address the moral wrong.

Permabear · 23-07-2015 9:40pm

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K-9 · 23-07-2015 10:28pm

Something like a bond or extra Employer PRSI would cover it, say an extra 0.5% for companies like OCS, which would go directly to a redundancy fund.

As for your cheating analogy, it would go against you in divorce proceedings and a good solicitor would use it to their advantage in negotiations.

Permabear · 23-07-2015 10:39pm

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K-9 · 23-07-2015 11:07pm

Well all 130 employees wouldn't necessarily get the entitlement.

Anyway, if another company does the same thing, the Government will try and legislate for it. Short term gain for a couple of companies, but all they'll have achieved is highlighting the loophole and maybe a few directors etc. will collect their bonus cheques.

andrew · 24-07-2015 11:33am

Well, adultry is a criminal offence in almost half of US states. There tends to be a strong relationship between moral wrongs and legal wrongs (with obviously notable exceptions).

Also, I'm assuming you're living in Ireland here - do you really not care that your money is paying for this? Do you really think that this problem is completely unsolvable without ruining the economy or legal system?

Permabear · 24-07-2015 12:09pm

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Godge · 24-07-2015 2:46pm

In respect of the "silos", you are correct, but in order to rebalance between capital and labour, you could make statutory redundancy payments an exception to the "silo" rule. You could shut down the "silo" factory to save money for the holding company but still be liable for the redundancy payments.

It doesn't have to be an either/or situation for or against the type of structures you describe. If the only thing that the other companies in the structure remain liable for is redundancy payments, workers are protected but businesses are also able to make business decisions albeit slightly more expensive ones.

andrew · 24-07-2015 3:01pm

My point was that there has always been a strong relationship between morals and laws, to the extent that even adultry was illegal in some places.

It's more that everything has an opportunity cost. The more money that goes on things like Clearys workers, the less there is for the stuff which it ought to actually be spent on.

Nobody is suggesting the abolisionof holding companies, or anything even like it. How about companies holding a reserve for redundancies if they employ workers? How about forcing holding companies to pay any debt that is specifically related to redundancies? There are plenty of policy options out there.

glacial_pace71 · 24-07-2015 6:15pm

Here's an interesting development: the report to the Minister of State, Ged, Nash, has been published in full.

http://www.djei.ie/publications/labour/2015/Clerys_report_070715.pdf

Many of the same concerns on this thread have been explored in the report. (Glad to see they also raise more than an eyebrow at the 'going concern' status and directors' responsibilities in this regard).

Although OCS operated under the provisions of the Companies Acts 1963-2013, many of the provisions in the revised statutory scheme (the Companies Act 2014) are broadly the same, as in effect it was a consolidation of existing law rather than any radical new departure.

Note the report was prepared in the context of the author having access to some of the court papers filed in respect of the winding up of the former OCS Operations subsequent to its acquisition by Natirum. However, it ultimately defers to the Superior Courts in determining the legality or otherwise of the liquidation. We'll just have to wait and see.

(Btw I mentioned in a previously-deleted post a number of parties who had initiated civil litigation in the High Court against various OCS companies. Ultimately, we may need to wait and see in terms of a range of parallel legal proceedings. There would not appear to be any criminal proceedings envisaged by the OCDE or DPP).

Depending upon the outcome of all the foregoing it looks like the current Government are minded to amend the law but, out of respect to the courts, are going to await the outcome before seeking to amend the scope of some of the existing statutory provisions and remedies.

Hotblack Desiato · 24-07-2015 9:04pm

And if a person holds 100% of the shares of a company, do we make him/her liable for its debts too? Let's go back to how commerce was done 400 years ago when anyone who went into business or invested in one was risking every asset their family owned. Eh, no.

If the concept of limited liability applies to companies owned by people it also applies to companies owned by other companies.

Statutory redundancy which a liquidated company can't cover is paid for out of the social insurance fund, which employees contribute to via PRSI, but all employers contribute towards it too.

Clearys

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