Administration only option for BHS directors, says expert

Insolvency law specialist Nick Pike of Pinsent Masons, the law firm behind Out-Law.com, said that it is "rare" for companies placed in administration to emerge from that process under a new buyer and continue trading.

Pike was commenting after BHS filed for administration on Monday.

"It’s clear that BHS has been in difficulty for some time," Pike said. "The fact that Philip Green sold the group for £1 last year indicated that all was not rosy. Only last month the creditors of the company voted to place it into a company voluntary arrangement, under which some stores were to be closed and rent significantly reduced on others. All that now seems to have been to no avail, because talks to obtain additional essential interim funding collapsed."

"It would appear that the directors had no alternative but to seek immediate protection for the company by placing it into administration, preventing any creditors taking action against it whilst a rescue plan is formulated – if indeed one can be," he said.

Pike said that if BHS' directors had not placed the company into administration and had continued to trade normally they could have exposed themselves to claims of wrongful trading under UK insolvency laws.

"The administrator will now be seeking to find a purchaser for the business," Pike said. "At the moment we don't know what the outcome is likely to be. Whilst it is possible for companies to emerge from administration and continue to trade, that is rare. It is more likely that one or more purchasers will emerge to acquire selected BHS stores than for the company as a whole to be bought from the administrator. This is what happened with Woolworths where there was no buyer for the whole business. Instead the company was broken up with selected stores bought by other retailers. The remainder of the business went into liquidation."