Suppliers of the collapsed fast fashion brand Missguided have filed a formal complaint with the Bankruptcy Office and are considering legal action against what activists say is a “reckless approach” by the company’s private equity owners.
Missguided called on administrators from consulting firm Teneo on Monday after months of searching for new funds after the boom in online clothing sales during the pandemic reversed when stores reopened. British fast fashion retailers have come under tremendous pressure from supply chain costs and supply delays as they battle new entrants such as China’s Shein.
More than a dozen UK-based suppliers, mostly in Leicester and Manchester, say they collectively owe millions of pounds for orders, some of which were made last month, with deliveries even requested on Monday, which Missguided entered the administration.
The company continues to trade while looking for a buyer, but customers complain on social media that they have not received deliveries of orders and are still waiting for a refund.
Hundreds of factory workers in the UK, meanwhile, are thought to have lost their jobs as clothing manufacturers struggle to find new business.
Campaigners said some factories in Leicester rely entirely on the Missguided business, which was founded in 2009 by Nitin Passy. He left in April, a few months after private investment group Alteri bought a controlling stake and took seats on the board. Ian Gray, the former CEO of Tottenham Hotspur Football Club and chairman of the organic vegetable business Abel & Cole, was appointed executive chairman of Missguided last month.
One provider said he was considering legal action because he believed Missguided could have acted fraudulently if it continued to place orders while “the administration is on the horizon.” Two suppliers said they had been told by the company that it was “business as usual” less than six weeks ago.
Nadim Arshad, owner of Manchester-based fashion vendor Moku, said his business was on the verge of collapse, owing him almost £ 500,000 in recent orders and now seeking legal advice and joining forces with other suppliers. who find themselves in this catastrophic situation. “
Another said his complaint to the Bankruptcy Office said that Missguided “has bought clothes from us in the last three months, even though he knows the company is in trouble and doesn’t think about all the costs behind producing our products.”
Alex Jay, head of insolvency and asset recovery at Stewarts, said: “When a company continues to trade, when its directors know they have no reasonable prospect of avoiding insolvency, then this may be the basis for a lawsuit.
“The question will be whether continued trading has increased the overall deficit owed by the company to creditors in general – in other words, whether directors have worsened the situation by keeping the company alive longer than it should, hoping to turn the business around. If they have done so, then claims may be brought. “
Another bankruptcy expert, Brian Burke of consulting firm Quantuma, said there was unlikely to be a “short-term solution” for suppliers who owed money, and any lawsuit would take time. He added that administrators would probably have to wait to assess how many unsecured creditors they could expect to be repaid, adding: “Unfortunately for the majority, my guess is that they will see significant losses.”
Campaigners have called on the government to improve the protection of suppliers and their workers, who they say are at the bottom of the pile without guaranteed payment by administrators.
In an open letter to Labor Behind the Label business ministers, he said the government had failed to “take a significant step forward in overseeing bad behavior and abuse of brand purchases” following its 2020 report on the garment industry in Leicester. accused Missguided of a “reckless approach” to the management of its suppliers.
“UK law is silent on the financial and legal responsibilities of companies to workers in the supply chain. Suppliers and supply chain workers are at the bottom of the pile as unsecured creditors in insolvency proceedings. This is deeply unfortunate, “the letter said.
Meanwhile, a number of former employees are considering a lawsuit against the company over allegations that the redundancy process was not properly managed.
A former employee said: “The whole company held a conference call with 25 minutes’ notice, people who were not there or on annual leave missed it. The call was an emotionless emotion message saying we had been laid off and our services were no longer needed.
“Many colleagues realized that they had lost their jobs on social media, they were all ruined.
The company and its administrators declined to comment.
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