Troubled Royal Mail considering Special Administration
Royal Mail is reportedly on the brink of collapse, amid record losses. The postal service has indicated that the continuing decline of its core business, coupled with strike action is to blame and is expected to report an annual operating loss of £350M (or more).
Negotiations between Royal Mail and the Communication Workers Union (CWU) are on the verge of failure, as Royal Mail and the CWU cannot reach an agreement over pay and changes to working conditions.
Recent reports suggest that Royal Mail and its parent company, International Distributions Services PLC have considered the possibility of special administration which could result in additional job losses among the company’s 140,000-strong workforce. Concerns have also been raised as to how this outcome would disproportionately impact the elderly and other vulnerable customers who may depend on its services.
What is Special Administration?
There are several special administration regimes which amend the general administration process set out in the Insolvency Act 1986 (IA 1986). These are found in industries where subject companies carry out a statutory function of a public nature, or where there is a wider public interest in having a bespoke administration regime. These regimes generally follow the process set out in the IA 1986, but the nature of the industry means that it is appropriate for the administrator to have modified objectives and corresponding powers to achieve those objectives.
The Postal Services Act 2011 sets out a special administration regime for companies that are a universal service provider. An application for a postal administration order under the Postal Services Act 2011 can only be made by the Secretary of State or OFCOM (with the consent of the Secretary of State).
What could happen with Royal Mail?
Royal Mail board would need Government approval to proceed with special administration – if approval was granted, Royal Mail, which includes Parcelforce, would then enter a formal insolvency process. There is no doubt that this outcome would have a huge impact on many businesses and individuals.
British Independent Retail Association CEO Andrew Goodacre said that:
“The situation at Royal Mail is very worrying. Previous strikes caused severe disruption to retailers who have shops and sell online. The possibility of administration for Royal Mail is an even greater concern as it may have an even more negative impact than the strikes. We urge Royal Mail management and the unions to resolve the issues before other smaller companies suffer the consequences.”
What should I do if my business is struggling?
When a company is facing financial difficulty the most important thing is to seek advice from a Licenced Insolvency Practitioner. It can be daunting but taking a proactive stance will put you back in control and almost certainly leave more options available, then if the position is allowed to worsen.
An Insolvency Practitioner is best placed to provide advice on all the options available. If the problems are too significant and company closure is appropriate, an Insolvency Practitioner can explain what this means and how to proceed.
Help from a Licenced Insolvency Practitioner
Keywood Group is a firm of Licenced Insolvency Practitioners with offices in Birmingham and London. Our team has over 20 years’ experience in advising businesses on their options and dealing with company closure. Our experienced team will work with you to assess the options available and guide you through the process.
If you want further information, please contact us for a no obligation chat
