Business Law & Compliance

Legal action against City Link marks new approach to former directors of bankrupt companies

2 min read

15 October 2015

Three former directors of City Link have been charged with criminal offences in relation to the collapse of the company last Christmas – which led to the loss of 3,000 jobs.

Managing director David Smith, finance director Robert Peto, and non-executive director Thomas Wright were recently charged with having failed to notify the business secretary of plans to make staff redundant.

According to the Department for Business, Innovation and Skills (BIS), “criminal proceedings have been commenced against Smith, Peto and Wright. They are charged with offences contrary to section 194 of the Trade Union and Labour Relations (Consolidation) Act 1992. We will not be commenting until the criminal proceedings have been concluded.”

The charges were brought in June, a few weeks before Dave Forsey, CEO of Sports Direct, was charged in relation to the collapse of USC.

As was revealed by The Guardian, Forsey has been accused of failing to notify authorities of plans to lay off warehouse staff in Scotland. Some 200 of workers were only given 15 minutes notice by the administrator in January before they lost their jobs.

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Philip Skyes, president of insolvency body R3, noted that the legal actions being taken against Forsey and the City Link directors marks a new approach by BIS to criminal proceedings against former directors of companies that have gone bust. 

He claimed that the insolvency profession has long called for clarity from government on what should and should not happen when business failure puts jobs at risk. 

“We are very pleased the government has taken a closer look at this topic over the last year,” Skyes said. “We are looking forward to the government’s imminent response to a call for evidence on redundancy consultations in insolvencies. We need the government to set out what exactly should happen, and exactly who is responsible for what, whilst taking into account the unique circumstances of insolvencies.

“Uncertainty over how the rules are applied – and what sanctions there might be for not adhering to the rules – helps no one, least of all the employees whose jobs are at risk.”