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After almost 45 years in the business, Laura Ashley’s Australian arm of its home furnishings and clothing company has been placed into voluntary administration. It operates under a licence from Laura Ashley UK, as does its sister company, Laura Ashley New Zealand. The UK arms and NZ arms have not been affected by the collapse. So how did this iconic brand fall so far?

Who Are The Players? 

The sole director of Laura Ashley Australia (Laura Ashley), Daryl Chait appointed FTI Consulting (FTI) as administrators on Thursday to help assess the company’s future. The administrators will take control over the business and have the same responsibility as Mr Chait, effectively as ‘external directors’ in their obligations to the company. A company appoints external administrators when the company is insolvent or is likely to become insolvent. The administrators’ role is to work out a way to save the company or administer the company’s affairs if it cannot be saved.

How Did it Happen?

FTI have yet to release details of the company’s difficulties, but there is speculation that the collapse has been due to a few seasons where the product range has failed to excite customers. The product design has failed to move with the times and trends of today, and many customers have commented that the brand is often too expensive or overpriced for its targeted clientele.

What Does it Mean?

The external administrators now need to assess the company’s financial position and the performance of individual stores. Each of its 38 stores will continue to operate as normal while the administrators commence their investigations. It is possible the company will need to streamline its operations to survive. But, this is determined after the first meeting of the creditors on or before the 19th January. Under the Corporations Act 2001 (Cth), creditors must hold their first meeting within eight days of the voluntary administrator’s appointment unless the court grants an extension of time and, at least, five business days’ notice is required.

At this first meeting, the creditors, being an individual or business who the company owes money, can vote to replace FTI as administrators or create a committee of creditors. If they decide to appoint a committee, they will work with FTI in helping to assess the company’s future and will receive and consider their reports. Only creditors who have lodged details of their claim with FTI are eligible to vote at this first meeting.

Once the outcome of the first meeting has been decided, if FTI remains the company’s administrators they will then begin their investigations. Creditors must organise a second meeting within 25 or 30 business days of the first meeting. FTI administrators will then report to the creditors and recommend whether the company should go into liquidation, be returned to the control of Mr Chait, as sole director, or enter into a deed of company arrangement.

The outcome of this meeting depends entirely on the administrators’ reports as to what they think is the best option for the creditors.

What Next?

If the creditors decide to return the control of Laura Ashley to Mr Chait, he will continue running the company as before, and he will be responsible for ensuring the company pays all of its debts when they fall due. It is rare for creditors to want to return the running of the company to the previous directors, as they evidently didn’t do a very good job the first time round. More likely, the creditors will either vote to put Laura Ashley into liquidation or enter into a deed of company arrangement (DOCA).

If the creditors decide to accept a DOCA, then within 15 business days of the meeting, they will sign a deed to this effect that will contain certain provisions for the company’s future. It will set out the following: 

  • What property will be used to pay back the creditors; 
  • Debts covered by the deed;  
  • The extent to which some debts will be released; and 
  • In what order the creditors will be paid out of the available funds. 
  • If the creditors decide to put Laura Ashley into liquidation, FTI will become the company’s liquidators and ensure that the company is wound up in a way that is fair and beneficial to all creditors.

Key Takeaways

Only time will tell Laura Ashley’s fate. But its demise, having come just days after the collapse of another iconic Australian brand, Dick Smith, is a warning to businesses and customers.  No company is exempt from financial difficulties. Be aware of the financial positions of all entities you purchase from or engage with.

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