The Company Lawyer

THE COMPANY LAWYER

VOLUME 38 NUMBER 6

COMMENT Guidelines for cooperation and communication between courts in cross-border insolvency matters: too far or not far enough? 169

ANALYSIS Payday loans: filling the gaps in the short-term loan market 172 Sir Philip Green: Villain or Victim? An analysis of the circumstances leading up to the administration of the BHS Group 180

NEWS 190

COMPANY LAWYER BRIEFING The private fund limited partnership: the reform company lawyers have been waiting for? 192 New IOSCO initiative to facilitate monitoring cross-border financial misconduct 195

INTERNATIONAL Concept of control under Takeover Code 2011 197

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180 The Company Lawyer

satisfactory”,6 and press commentary speculated that the Sir Philip Green: Villain real motivation behind the settlement related to the threats to remove Sir Philip’s knighthood.7 or Victim? An analysis However, it was not just Sir Philip Green who came of the circumstances in for criticism. Lord Grabiner, as chairman of Taveta Investments (No.2) Ltd, the owner of BHS, was described leading up to the as “docile”8 and “complacent”9 in failing to provide any independent oversight or challenge to Sir Philip Green’s administration of the decision-making. The buyer of BHS, Retail Acquisitions Ltd (RAL) and their board members were described as BHS Group “exploit[ing] BHS for their personal gain”, with Dominic Chappell being “the worst culprit”,10 who “had his hands Mark Stamp* in the till”.11 In addition, advisers on all sides were seemingly complicit in BHS’s demise and solely focused Corporate governance; Corporate insolvency; on securing their fees. Directors’ liabilities; Occupational pensions The purpose of this note is to attempt to uncover, moral indignation aside, the extent to which the actions that “Whatever the legal issues, there is a mega, mega, were the subject of withering criticism by the select mega — moral responsibility”1 committee were actually unlawful and, on a related note, what changes to the law may be necessary to prevent a Introduction similar situation arising in the future. This note looks at the issues relating to the BHS situation in the following 2 The Parliamentary Report into the affairs of BHS leading sections: (1) background; (2) dividend payments; (3) to its administration in April this year makes eye-watering pensions schemes; (4) the sale of BHS; (5) directors’ reading. It paints a picture of corporate greed, duties and corporate governance; and (6) proposals for incompetence and neglect, all at the expense of BHS’s reform.12 employees and pensioners. Sir Philip Green came in for significant personal Background criticism by the select committee as the architect of BHS’s demise BHS was a nationwide department store founded in 1928 by a group of American entrepreneurs, who modelled it “who chose to run these companies as his own on the US version of Woolworths. The company expanded personal empire, with boards taking decisions with steadily and by 1970 employed 12,000 workers in 94 reference to a shared understanding of his wishes stores across the UK, becoming established in the mind rather than the interests of each individual 3 of the UK consumer as one of the leading retail brands. company”. In 1986 BHS merged with Habitat and Mothercare to The committee also concluded that they “found little form Storehouse Plc and was subsequently sold to Sir evidence to support the reputation for retail business Philip Green in 2000 for £200 million. acumen for which [Sir Philip] received his knighthood”.4 In 2000, BHS had made a net loss of more than £45 Nor did the criticism cease even once Sir Philip agreed million. Initially it performed well under Sir Philip’s to put aside £363 million to fund a new scheme for BHS leadership and, between 2001 and 2004, generated profits pensioners.5 While generally welcomed, it was described of £317 million, paying significant dividends to Sir Philip by some members of the select committee as “not Green’s family companies. At the beginning of 2002, the BHS pension funds were £17 million in surplus.

* LLB (Soton), LLM (Wisc), LLM (Cantab); Partner at Milbank, Tweed, Hadley & McCloy LLP. I would like to thank James Mackay of Milbank, Tweed, Hadley & McCloy LLP for his help in the writing of this article and Camilla Barry, Partner at Macfarlanes LLP, who reviewed those parts relating to pensions. Any opinions expressed and errors made are entirely my own. 1 Frank Field, Hansard, HC Vol.615, col.985 (20 October 2016). 2 The First Report of the Work and Pension Committee and Fourth Report of the Business, Innovation and Skills Committee of Session 2016–17 (25 July 2016), HC 54 (BHS report). References to the “select committee” throughout this article are to this joint committee. 3 BHS Report (25 July 2016), para.135. 4 BHS Report (25 July 2016), para172. 5 This amount comprised £343 million to be put into a new scheme and £20 million for set-up costs. See Pensions Regulator, Press Release (28 February 2017). 6 Iain Wright, Twitter (28 February 2017). 7 See, for example, the Daily Telegraph headline “Sir Philip Green puts £363m into pension fund of collapsed retailer BHS after threats to strip his knighthood” (28 February 2017). 8 BHS Report (25 July 2016), para.132. 9 BHS Report (25 July 2016), para.136. 10 BHS Report (25 July 2016), para.138. 11 BHS Report (25 July 2016), para.171. 12 The directors of TIL and TIL2 commissioned an opinion by Lord Pannick QC and Michael Todd QC, which disputes a number of the select committee’s criticisms (the “Taveta Opinion”). It is a fair exposition of the relevant law but, given the reason for which it was prepared, is by its very nature self-serving and selective in its analysis of the issues and facts. See https://www.parliament.uk/documents/commons-committees/work-and-pensions/Taveta-Response-BHS-161016.pdf. The select committee obtained an opinion from Gabriel Moss QC to review this opinion: https://www.parliament.uk/documents/commons-committees/work-and-pensions/Note-from-Gabriel-Moss -QC-on-Pannick-opinion.pdf [Both accessed 5 April 2017].

By 2005, profits were dropping rapidly as new and In addition, the select committee noted that Sir Philip more exciting retail entrants, such as Primark and Zara, was able to boost profitability in the short term through came to the market. Various discussions were held with sale and leaseback of certain BHS stores to a company Asda and Debenhams in 2006 to sell the business, but owned by Lady Green.16 Although this gave rise to a ultimately commercial terms could not be agreed. BHS capital receipt by BHS, and hence short-term profitability, has never made a profit since 2009. In July 2009, as part there was an ongoing additional annual cost in terms of of an internal group restructuring, BHS was sold to Taveta rental payments of £153 million, which depressed future Investments (No.2) Ltd (TIL2). TIL2 was held by a sole profit. It was also tax efficient, given the family company corporate shareholder, Taveta Investments Ltd (TIL). Sir involved was registered in Jersey. Ultimately, these Philip’s wife, Lady Green, held an 88 per cent stake in properties were sold back to BHS as part of the RAL TIL, with the remaining shares dispersed through a acquisition. number of minority shareholders. The rules on dividend payments are clearly set out both In 2013, after commencing discussions for the sale of in common law and ss.829–853 Companies Act 2006.17 BHS with Paul Sutton, Sir Philip Green discovered that Dividends can only be paid out of distributable reserves Mr Sutton was a convicted fraudster and serial bankrupt if the preceding year’s accounts indicate there are and, although he continued negotiations for some time, sufficient reserves to do so. If such accounts do not so ultimately terminated them. Subsequent negotiations were demonstrate, then interim accounts have to be specifically held with Dominic Chappell, a former professional racing prepared which establish that sufficient distributable driver who also had a history of multiple bankruptcies.13 reserves are available. Chappell proposed to acquire BHS through his investment Accordingly, no dividend payments can be made if vehicle RAL, and the deal was concluded on 11 March there is a deficit on shareholders’ funds on the balance 2015. Just over a year later, on 25 March 2016, BHS was sheet (i.e. arising from accumulated losses) until such put into administration—11,000 workers were made time as the deficit is eliminated either by a reduction of redundant and the pension funds were reported to be £571 capital or injection of additional capital. Overlaying these million in deficit. technical rules are the directors’ fiduciary obligations set In February 2017 a deal was agreed with the Pensions out in s.172 Companies Act 2006, requiring each director Regulator by which Sir Philip Green contributed £363 to act in a way in which he/she considers, in good faith, million towards a new pension fund for the benefit of would be most likely to promote the success of the BHS pensioners. This had the effect of enabling BHS company for the benefit of its members as a whole, and pensioners either to move their pension to a new scheme having regard to the factors set out in that section, which or, if their pension entitlement was less than £18,000, to include the likely consequences of any decision in the withdraw their entitlement as a lump sum. The new long term, the interests of company employees and the scheme is to provide benefits which are higher than those maintenance of “high standards of business conduct”.18 which would have been achievable if the original schemes Clearly, just because a company has distributable had been transferred to the Pension Protection Fund (since reserves does not mean that it is wise or sensible to pay it avoids its automatic 10 per cent discount from initial out all such reserves as dividends: the competing needs entitlements) but approximately 12 per cent lower than of the business for capital investment and additional would have been achieved if BHS had met its pension working capital have to be taken into account by the obligations in full.14 directors in any decision to recommend or pay a dividend. Turning to the BHS case, no issue has ever been raised Dividend payments as to the validity of the payment of the dividend from a

15 distributable reserves perspective. The focus of the select In essence, the charge levelled against Sir Philip Green committee’s interest was principally on the wisdom of is one of unjust enrichment. BHS paid out £423 million the payments given the subsequent administration of BHS. in the 2002–2004 period. This level of dividend payment, When viewing this objectively, there is no basis to together with the trading losses and increasing pension conclude that Sir Philip Green did anything unlawful or, deficit in the years that followed, left BHS in a far weaker indeed, at the relevant time, inappropriate. Clearly, in position by 2014 than it had been in 2000 when acquired retrospect, the payment of these extremely large dividends by Sir Philip Green. was unwise but, at the time, BHS was a profitable company, its finances appeared stable and there was no reason to anticipate its future financial troubles.

13 Chappell claims that he was hired by Sutton to work on his bid for BHS. Sutton, on the other hand, claimed that he was only employed as Chappell’s driver in an arrangement intended to compensate Sutton for money lost in a failed property development run by Chappell. 14 “Sir Philip Green strikes BHS pension deal with regulator”, BBC News, 28 February 2017. 15 Throughout the BHS Report references are made to Sir Philip Green. Strictly this is not always accurate since, in a number of cases, the references should be to the relevant Green family-owned company—see the corporate structure chart at Fig.4, para 116 of the BHS Report (25 July 2016), Fig.4, para.116. To be more readable this article adopts a similar convention. 16 BHS Report (25 July 2016), para.15. 17 At the time the dividends were paid, the Companies Act 1985 was in force, but the rules were essentially the same. 18 Companies Act 2006 s.172(i)(a)–(f). These specific factors to be taken into account were not in force at the relevant time that the dividends were paid. The law at that time relied on equitable rather than statutory rules which required directors to act generally in the best interests of the company.

The duty to promote the success of the company is to a proportion of the retiree’s final salary). When BHS primarily a subjective duty and, provided that the directors was acquired by Sir Philip Green in 2000 the pension honestly believe that payment of dividends was in schemes had a small surplus of £45 million. At the time accordance with s.172, then that is normally enough.19, 20 of BHS’s administration the schemes were collectively There is, however, an overriding objective element to the £345 million in deficit. The pension schemes had entered duty so that if no director could have reasonably taken a period of formal assessment for entry into the the view that the payment of the dividend promoted the collectively funded Pension Protection Fund (PPF).26 This success of the company, the court could intervene.21 also triggered a debt for the deficit calculated on a buy-out Generally, however, a court will not attempt to basis under s.75 Pensions Act 1995 (i.e. for the cost of second-guess a director’s commercial decision and, in purchasing annuities to guarantee the benefit for reviewing the appropriateness of any decision, will take members) generating an increased deficit of £571 million. into account the circumstances at the relevant time The reasons for the increase in the deficit over the reasonably apparent to the director (without reference to period from 2000 were not addressed by the select future events). Given the gap between the payments of committee in their report, but the BHS schemes were not the dividends under scrutiny (the last of which was in alone in seeing the rise of a significant deficit. The 2004) and the administration of BHS in 2016, there is banking crisis in 2008 and the subsequent fall in the value very little to suggest that the directors of BHS would be of equities and bond yields, together with the rise in life considered to be in breach of their fiduciary duties. expectancy, put pressure on all final salary schemes, Furthermore, even if the directors had been in breach, including BHS’s, over this period. The select committee there would have been few implications under English did note that the BHS deficit rose disproportionately law. A director’s fiduciary duties are owed to the higher than in comparable schemes.27 company alone. In reality, however, absent solvency Throughout this period there had been ongoing issues, where a company is owned by a single shareholder, discussions with the trustees of the pension schemes about attempting to differentiate between the interests of the BHS making additional contributions to reduce and company and that shareholder is largely theoretical. eventually eliminate the deficit. By 2009, the deficit had Accordingly, it would be for the company (or the risen to £166 million (£7 million in 2006),28 but the owning shareholder through the statutory derivative trustees’ continuing discussions with the company proved action22 process) to bring any claim against the directors futile and BHS refused to make significant additional for breach of duty. Clearly where the director and contributions. On the basis of the annual contributions shareholder is, in effect, the same person, no proceedings then made, the deficit would have taken 12½ years to be will be brought. Of course, the position might have been eliminated in 2009 and 23 years in 2012.29 The median entirely different if the dividends had been paid shortly for other company schemes was eight years. Indeed, such prior to BHS going into administration.23 Not only would was the concern over the lack of funding, the Pension the payment of the dividend be capable of being clawed Regulator (tPR) had commenced an investigation into the back under the Insolvency Act 1986,24 but the position.30 administrator or liquidator could bring a claim in the In 2013, a restructuring of the BHS pension scheme company’s name against the directors for breach of their (codenamed “Project Thor”) was proposed: TIL2, the fiduciary duties.25 This, however, was not the case here. holding company of BHS, would make a one-off contribution of £54 million and currently employed Pension schemes scheme members would be transferred to a new scheme with lower pension entitlements, while the existing The second area on which the select committee focused scheme (comprising retired and non-consenting members) was the pension schemes. BHS has two defined benefit would be taken over by the PPF. In essence, scheme pension schemes (i.e. schemes that pay out a pension of a pre-determined amount on retirement, normally related

19 See Re Smith and Fawcett Ltd [1942] Ch. 304 CA. 20 Companies Act 2006 s.170(4) states that the codified general duties of directors under the Companies Act 2006 are to be interpreted and applied in the same way as the common law rules or equitable principles. 21 Charterbridge Corp Ltd v Lloyds Bank Ltd [1970] Ch. 72 Ch D at 74. 22 A derivative action is one brought on behalf of the company by a shareholder where the board refuses to do so. The procedure is set out in ss.260–264 Companies Act 2006 and requires leave of the court. 23 The cases indicate that the company must be on the verge of insolvency before a court will intervene. A risk of insolvency is not enough. A helpful exposition of the law is set out in paragraphs 191 and 192 of the Taveta Opinion, paras 191 and 192. 24 Under s.238 Insolvency Act 1986 transactions at an undervalue can be set aside and the provisions of s.214 (wrongful trading) imposes personal liability on directors for debts of a company in certain circumstances. 25 As soon as it appears that a company has solvency issues then the duties of directors are focused towards creditors’ interests rather than shareholders’: West Mercia Safetyware Ltd v Dodd (1988) 4 B.C.C. 30 CSA (Civ Div). This duty is expressly preserved by s.172(3), Companies Act 2006. 26 The Pension Protection Fund is a scheme funded by the Government and levies payable by all eligible pension funds to provide compensation to members of defined benefit pension schemes where the relevant employer goes into insolvent liquidation and there are insufficient assets within the scheme to cover the level of compensation that would otherwise be payable by the PPF. The amount of compensation payable is usually significantly less than members would have received if the employer had remained solvent. See http://www.pensionprotectionfund.org.uk [Accessed 5 April 2017]. 27 BHS Report (25 July 2016), para.22 and n.43, based on tPR, Scheme Funding Statistics (May 2014). 28 BHS Report (25 July 2016), para.19 and Table 2 29 BHS Report (25 July 2016), para.23. 30 BHS Report (25 July 2016), para.22

(2017) 38 The Company Lawyer, Issue 6 © 2017 Thomson Reuters (Professional) UK Limited and Contributors Analysis 183 members would bear three-quarters of the cost of the not a Financial Support Direction) imposed on them if pensions restructuring. Given the nature of the transaction, the requirements of that section were met, given that Lady the restructuring was put before tPR for approval. Green is an associate of BHS by virtue of her indirect In January 2013, Project Thor was put on hold—the control and Sir Philip Green, as her husband, is treated select committee believed that the real reason underlying as similarly associated. Nor does it matter that, following this decision was the investigation being carried out by the sale to RAL, such persons are no longer associated. tPR as to whether the “moral hazard” provisions contained Under both the Contribution Notice and the Financial in the Pensions Act 2004 would produce a better result Support Direction, tPR is able to look back (six years in for the PPF and Sir Philip’s unwillingness to divulge the the case of a Notice and two years in the case of a requested information.31 A detailed analysis of this area Direction), so that if the connection was present at that of the law is outside the scope of this article but, in time such persons fall within the ambit of the section.40 essence, these provisions give tPR power to issue a Notwithstanding the settlement that was ultimately Contribution Notice or a Financial Support Direction agreed with tPR, it would have been difficult for them to under s.38 and s.43 Pensions Act 2004, respectively. A demonstrate, in relation to the sale to RAL, that TIL2 or Contribution Notice requires a specified amount to be members of its group acted deliberately to avoid their paid into the pension scheme by an individual or a obligations to the pension schemes. It would have to show company where tPR has concluded there is a deliberate that the sale was a sham or a sale at an undervalue to attempt to prevent the recovery of the debt either to the RAL41 and, even if it could do this, on the basis of the pension fund or the PPF, or an act or deliberate failure to Bonas case,42 any Contribution Notice would be limited act has detrimentally affected in a material way the to the amount of such undervalue. More probably, tPR likelihood of the accrued scheme benefits being received.32 would have focused on a Financial Support Direction on A Contribution Notice can be imposed in respect of an BHS Ltd, the employer, TIL2 or any company within that underfunded scheme on an employer or person33 group on the basis that it is reasonable to do.43 “connected” with or “associated” to34 an employer, such Pausing there, at the time of the sale to RAL there were, as controlling shareholders and other companies directly following the abandonment of Project Thor, no or indirectly under common control.35 A Financial Support substantive arrangements in place for the reduction of the Direction does not require any “misconduct” and, like a pension scheme’s current deficit, nor had tPR served any Contribution Notice, can be served on connected and Contribution Notice or Financial Support Direction. One associated persons, but not on individuals. The sponsoring of the reasons for the lack of progress was that tPR lacked employer must be either a service company36 or be the information needed to make a decision. It had not insufficiently resourced37 and the Direction may be given exercised its statutory information-gathering powers and to former employers.38 In both cases tPR must be of the relied on the informal route of the trustees requesting the opinion that it is reasonable to impose the Notice or information from the company. The reasonableness test Direction having regard to the factors set out in the Act, which tPR is required to apply in determining whether to which broadly include the degree of connection which issue a Contribution Notice or a Financial Support the entity has with the scheme, the financial circumstances Direction necessitates tPR having financial information of the person, any benefits the person has received from relating to the company and the persons that may be the an employer or the scheme and, in the case of subject of any Notice or Direction. Contribution Notices, the purpose of the particular act or This highlights the role that tPR undertakes in relation failure to act, to prevent the recovery of the debt.39 to schemes. In its evidence to the Select Committee, tPR Accordingly, TIL2 and TIL would probably be treated made it clear that its purpose was more regulatory in as connected with BHS given that all were under control nature than supervisory, and that its moral hazard of the same person (in this case, Lady Green). Sir Philip provisions were designed in part to “act as a deterrent to Green and his wife could have a Contribution Notice (but poor behaviours”.44 tPR has, on a limited number of

31 BHS Report (25 July 2016), para.35. 32 It is difficult to establish these grounds, and the amount of recovery may be limited: see Bonas Group Pension Scheme; Michael Van de Wiele NV v the Pensions Regulator (17 January 2011), Warren J, Upper Tribunal (Tax and Chancery Chamber), FS/2010/0007. See http://www.bailii.org/uk/cases/UKUT/TCC/2011/B3.html [Accessed 5 April 2017]. tPR sought a Contribution Notice for £5 million and settled at £60,000. 33 An individual can only be made the subject of a Financial Support Direction if he is an associate of an individual that is an employer, which is not the case here. 34 These terms are given the meaning set out in ss.249 and 435 Insolvency Act 1986. 35 For these purposes a holding of more than a third of the voting power at a general meeting will constitute control: s.435(10), Insolvency Act 1986. 36 Defined as meaning that the company’s turnover is solely or principally derived from amounts charged for the provision of the services of its employees to other members of its group: s.44(2) Pension Act 2004. 37 Defined as meaning that net assets of the company are less than 50% of its share of the buy-out deficit of the scheme and where any connected or associated companies in its group do have sufficient net assets to make up the difference: s.44(3) Pensions Act 2004. 38 A helpful summary of tPR’s powers are set out in the Clearance Guidance published by tPR and set out at http://www.thepensionsregulator.gov.uk/guidance/guidance -clearance.aspx [Accessed 5 April 2017]. 39 Pensions Act 2004 s.38(7), s.43(7). 40 Pensions Act 2004 ss.38(5)(c) and 43(9), respectively. 41 See discussion under section “Sale of BHS”. 42 See Bonas Group Pension Scheme (17 January 2011), Upper Tribunal (Tax and Chancery Chamber), FS/2010/0007, http://www.bailii.org/uk/cases/UKUT/TCC/2011/B3 .html [Accessed 5 April 2017]. 43 This analysis assumes that BHS Ltd had net assets which were less than 50 per cent of the buy-out deficit in the scheme. Based on its latest available accounts (last published as of 2014), this undoubtedly seems to be the case. 44 Letter from tPR to Frank Field MP, dated 24 June 2016.

(2017) 38 The Company Lawyer, Issue 6 © 2017 Thomson Reuters (Professional) UK Limited and Contributors 184 The Company Lawyer occasions, had success in implementing its moral hazard This report would have given most purchasers pause for provisions, but it can take a number of years before it thought, but not RAL. Notwithstanding the absence of actually invokes such powers. There is no requirement pension due diligence, the lack of any comprehensive for either buyer or seller to seek tPR approval prior to pension warranties and the inability to communicate with any sale being made, although either party can apply for the trustees or their advisers, RAL proceeded with the voluntary clearance. Voluntary clearance is, however, sale. rarely requested as there is no statutory timetable or So why did RAL proceed when no sensible purchaser process which sets out how such clearance may be would have done so? The answer appears to be either obtained. tPR made it clear that, without substantial hopeless optimism or because it had nothing to lose given additional funding, it would be unable to adopt a more that it was not devoting any of its own resources to the interventionist approach. purchase. The select committee were, however, critical of tPR Olswang concluded its report with: as “reactive” and, “slow-moving” and for not showing “Finally, we note however the commercial comfort “more urgency”45 in engaging with BHS and the pension that the directors are taking from the representations scheme trustees. However, the select committee did not from Sir Philip Green that he will continue to support accept Sir Philip Green’s contention that inaction by tPR the business post Completion and that he has a big was at the heart of the failure to reach a solution on the commercial interest in ensuring that the Group funding of the pension schemes. continues to trade (given the large concession The sale of BHS, particularly from the pensions arrangements with Dorothy Perkins, Wallis and perspective, was remarkable. On a conventional sale Evans) and also due to the reputational risk he is involving an underfunded defined benefit scheme, a exposed to should BHS fail. We do not doubt these purchaser would carry out considerable due diligence so commercial matters and note that great comfort as to quantify the size of the deficit46 and understand the could be drawn from such. level of risk involved, in particular as to whether tPR That being said, there is no legal obligation on could exercise its moral hazard provisions at some time him to do so.”50 in the future. Part of this due diligence would commonly involve discussions with the trustees and their views on Going back to the original question posed: did Sir Philip the purchaser’s covenant and future funding needs. In Green or TIL2 actually breach any law? The answer addition, there would be, as part of the sale and purchase appears to be no. tPR had not issued a s.7251 notice to agreement, an appropriate allocation of risk between the obtain information it required for any decision on whether buyer and seller with the seller possibly agreeing a to exercise its moral hazard provisions, preferring instead reduction in price or providing an indemnity to underwrite to use the more informal route of the trustees requesting certain additional contributions being made to the pension the information from BHS. Nor was tPR’s consent needed funds to reduce or eliminate any deficit.47 before any sale was made. On the basis of information In BHS’s case RAL did instruct both Grant Thornton provided to the select committee, Sir Philip Green and Olswang to review the pension arrangements, but (although acting in a dilatory and cavalier manner by not their ability to do a thorough job was constrained, given engaging with the trustees or putting in place a realistic the limited information made available to them and their plan for addressing the deficit) was not acting unlawfully. lack of access to the trustees or their advisers, such that Given the absence of any legal liability, what are the Olswang noted that their “analysis and advice is limited lessons that arise from the collapse of BHS from a to the types of issue which arise on a transaction of this pensions perspective? First, not surprisingly, the system sort”.48 In effect, Olswang were saying that in absence of of regulation is not designed to deal with a situation in relevant information their observations were purely which a buyer is prepared to take a disproportionate theoretical. Indeed, Olswang went further: amount of risk. Most buyers in a similar situation to RAL would have withdrawn from the sale or substantially “we are not able to give any material comfort … that readjusted the economics to ensure the pension funds it will be possible to avoid an insolvency post were put on a more stable financial footing. Having said completion given the sheer size of the pensions that, why should the members of pension schemes (and deficit.”49 the PPF levy-payers) suffer prejudice attributable to the naivety or recklessness of a buyer? Indeed, the Institute of Directors has recently called for tPR to be able to

45 BHS Report (25 July 2016), para.49. 46 There is a statutory requirement in s.224 Pensions Act 2004 to have an actuarial valuation conducted every three years on a pension fund’s assets. Outside this period, trustees may commission a more informal valuation but a purchaser would have to conduct due diligence to establish the level of deficit at the time of purchase. 47 The Sale and Purchase Agreement that was signed on 11 March 2015, provided a minimal level of warranty protection on the pension schemes. 48 Olswang Letter, dated 7 March 2015 to Swiss Rock Plc and RAL. 49 Olswang Letter, dated 7 March 2015 to Swiss Rock Plc and RAL. 50 Olswang Letter, dated 7 March 2015 to Swiss Rock Plc and RAL. Of course, this is a lawyer’s way of saying “you must be mad to go ahead but you are the businessperson and understand risk better than me”. 51 Pensions Act 2004 s.72 gives tPR the right to require trustees, advisers or employers or any other person appearing to tPR as having relevant information to produce such information to it as set out in the relevant notice served under that section.

(2017) 38 The Company Lawyer, Issue 6 © 2017 Thomson Reuters (Professional) UK Limited and Contributors Analysis 185 prevent acquisitions if this would result in material return. Equally, the trustees can, in some cases, require prejudice to the relevant pension schemes.52 Furthermore, additional contributions from the employer or trigger a this sentiment has been recognised by the chief executive winding up of the fund. The problem is that each of these of tPR, who has asked for the power to be notified of, “solutions” can damage the scheme and its members more and for rights to intervene on, sales of companies with than assist them by economically prejudicing the company an underfunded pension scheme.53 and hence its ability to trade profitably and make future Enhancing the powers of tPR may be the way to go, contributions into the scheme. but with two major caveats. First, tPR will need to change So what is the solution? If tPR does get the power to culturally from a reactive, paper-driven regulator to one vet sales for their impact on pension schemes then, in which is more proactive, swift and commercially savvy. consultation with the trustees, it will be able to address The challenge is that if any formal notification process the issue arising from lack of engagement. However, is unduly prolonged and administratively burdensome where no sale is proposed, it would seem to make sense then it will adversely impact upon the M & A process. that the trustees are granted some statutory rights (perhaps Indeed, many sales are beneficial for pension scheme a more tailored version of tPR’s rights) to obtain members since they enable the business to be driven information from the company so at least they can make forward by a new owner who is often prepared to make informed decisions about the exercise of the powers that investments that the current seller would not otherwise they do currently have. make, and give trustees an opportunity to obtain an For the reasons stated above, it would be unfair, unwise enhanced contribution as the price of obtaining their and impractical to put the responsibility solely on tPR to consent to any weakened covenant that may be associated ensure that sales of companies with an underfunded with the new buyer. pension scheme only take place where there is no Secondly, this first objective cannot be achieved unless prejudice to its scheme members. The real solution, it is it is properly funded by central government, since submitted, lies in empowering the trustees (or, more significant recruitment will be needed in order to ensure radically, the employees generally) to bring claims should that a streamlined and efficient process is introduced. One directors fail in their responsibilities. This is discussed in would have thought that such additional investment the section “Proposals for Reform” below). should, in the scheme of things, be relatively modest, and given that it might well save future claims on the PPF, The sale of BHS be cost-efficient. Currently, the PPF does not involve a cost to the taxpayer given its nature of funding but, given The implication from the BHS Report was that the sale the adverse social impact for pensioners of schemes of BHS to RAL was not a bona fide transaction and was entering the PPF, there is surely a compelling case for principally done in order for the Group to avoid its central government to resource the additional funds responsibilities to the BHS pension funds. Indeed, its necessary for tPR to peform an enhanced role. Having chairman, Frank Field, has written to, and met with, the said all that, it will take a number of years before tPR will Serious Fraud Office, encouraging them to investigate be ready and able to fulfil this role in a manner which whether money was moved in such a way as to attempt to mislead people into believing Mr Chappell was a does not prejudice the implementation of ordinary course 54 corporate activity. credible buyer for BHS. The second major area that requires reform is the ability On what basis could one claim that the sale of BHS to of the trustees and tPR to get information from a RAL was not a bona fide transaction? It is fair to say that company. Again, the system is not designed to deal with the sale looked extraordinary in a number of ways. First, the situation where a company simply refuses to have a the buyer was represented by Dominic Chappell, a substantive discussion with the trustees. This is a very multiple bankrupt with no retail experience. Secondly, despite numerous assurances to the contrary, RAL was rare situation, given that a constructive dialogue between 55 the trustees and company is normally considered mutually never able to produce the £35 million of equity that it beneficial. But, if this is not the case, the trustees’ room had promised to put into BHS. Indeed, the only funding for manoeuvre is limited. The trustees do have a couple that RAL was able to obtain was a £5 million loan to RAL from Allied Commercial Exporters on the day before of “nuclear weapons”, including altering the investment 56 strategy of the fund to more secure investments (fixed signing. The terms of such financing were interest rate instruments, gilts. etc.), to reflect the weaker punitive—notwithstanding that it was fully secured on a covenant of the company or buyer, which will have the BHS distribution centre, the total redemption of the loan impact of increasing the deficit given the lower rate of was for £6 million, £2 million of which was due a week

52 Lady Judge, the chairwoman of the Institute of Directors and former chair of the Pension Protection Fund, believes that consent should be required for sale of companies with a turnover of at least £200 million and where the pension fund covers more than 2000 employees: Guardian, 10 October 2016. 53 Financial Times, 12 August, 2016. Interestingly, in her evidence to the select committee, the chief executive of tPR said that she thought it “disproportionate” for clearance to be obtained prior to any sale. 54 Guardian, 27 July 2016. 55 “From an early stage, RAL’s proposal came with a substantial commitment to fund BHS. On 12 December 2014, Dominic Chappell talked his plans through with Anthony Gutman of Goldman Sachs. RAL would provide £120 million of working capital and £35 million of equity” (BHS Report (25 July 2016), para.90, referring to an email from Dominic Chappel to Anthony Gutman on 1 August 2015: “SwissRock to invest £35 million clean, unencumbered equity funds into BHS”). 56 BHS Report (25 July 2016), paras 99–104.

(2017) 38 The Company Lawyer, Issue 6 © 2017 Thomson Reuters (Professional) UK Limited and Contributors 186 The Company Lawyer after the sale and the remainder two months later. Arcadia, Directors’ duties and corporate governance a member of the Taveta Group, came to the rescue on the The select committee reserved its most damaging outstanding amounts by guaranteeing an HSBC loan to comments for the issues surrounding the lack of corporate BHS and providing other loans and cash in the amount governance on the BHS sale. The chairman of TIL2 was of £10 million.57 As the select committee noted “[Sir Lord Grabiner, a leading silk. The board had delegated Philip] was both sides of the deal”.58 to a sub-committee the power to oversee the sale. Thirdly, RAL did not take the steps that any sensible Unusually, this sub-committee did not have specific buyer would have taken on the sale. As discussed parameters on its powers or the requirement to report previously, and despite the warnings of its advisers, it back to the main board with its recommendations. This proceeded without any visibility of the true extent of the is unusual (but not unlawful) because directors are not size of the deficit and in ignorance of whether a revitalised able to abrogate their responsibilities to a third person, Project Thor could be achieved. The select committee but delegation is permissible with appropriate supervision concluded that: and appropriate constraints on a sub-committee’s power “[Dominic Chappell and RAL] … were manifestly is usually demonstrative of the directors being on the right unsuitable owners of BHS. It is inconceivable that side of the line. someone with Sir Philip Green’s experience The chairman and the board played no part in the sale, seriously considered otherwise.”59 and Lord Grabiner did not even know the identity of the buyer. The select committee commented on the Does all this evidence amount to a sham or fraudulent “remarkably docile attitude for a Chairman of the board”,60 transaction? Clearly the evidence does not paint a positive particularly in relation to Lord Grabiner’s statement that picture of the process or of the individuals engaged in it. the presence of all the non-executive directors would not In reality, the only basis for a charge to be brought would have made any difference to the decision as he “would be the common law offence of conspiracy to defraud but, not be in a position to second guess the views of the absent some other compelling evidence, it will be difficult negotiators”.61 to establish any such case against Sir Philip Green or his Michael Todd QC in the Taveta Opinion emphasises group companies. that the duties of the directors of TIL2 are owed to the The fact that Chappell and RAL were men of straw company alone and, given that it was a wholly owned does raise its own issues as to the substance of the subsidiary, its sole shareholder was able to direct the transaction, but it is in no way conclusive. In respect of directors to sign the Sale and Purchase Agreement with the funding of the transaction, it is not uncommon for a RAL or to ratify their decision to do. Accordingly, if the seller’s financial advisers to provide “stapled financing” directors of TIL2 had taken the view that the sale to RAL to a buyer in order to facilitate the sale. Admittedly, this was contrary to its interests, the only option would have is one step further, but it is not unheard of for sellers to been for them to resign and the sale would have proceeded provide financial support to a buyer to facilitate a sale, anyway.62 whether in the form of guarantees, loan notes or even Both Michael Todd QC and Lord Grabiner seem to be retaining an equity stake, and the select committee were saying that, given the chairman could have no influence unduly critical of Sir Philip Green in this respect. Finally, on the outcome of any decision relating to the sale of a seller has no duty to a buyer to ensure that it discloses BHS, it was quite legitimate for him (and the rest of the all relevant information or to ensure that its employees board) to take no interest in it. Is this right? It is true that or pensioners would be looked after following a sale. Nor Lord Grabiner’s duties were owed solely to TIL2, that does the seller have to ensure it sells to a competent or the sole shareholder of the company wanted the sale to knowledgeable buyer. Caveat emptor—let the buyer proceed, and that if a director voted against the sale he beware—is the underlying principle. could be removed and replaced by one that would. Having In conclusion, given the high burden of proof required said that, should not a director, in relation to such a high in any criminal prosecution, the necessary element of profile sale, have put himself in the position where he dishonesty combined with the lack of any substantive could ask the question “what steps have been taken to evidence means that any prosecution of Sir Philip Green avoid huge reputational damage to the company and all for his involvement in the BHS sale seems, at best, a very those associated with it if the sale to this particular buyer remote possibility. does not work out in the short term?” In part, this would involve a discussion around the credibility of the buyer and his business plan, and the implications for TIL2 if BHS failed shortly after the sale, measured against the economic and reputational damage to TIL2 if the sale did

57 BHS Report (25 July 2016), para.101. 58 BHS Report (25 July 2016), para.102. 59 BHS Report (25 July 2016), para.112. 60 BHS Report (25 July 2016), para.132. 61 Lord Grabiner’s letter to Frank Field and Iain Wright dated 6 July 2016, para.15. 62 Taveta Opinion paras 89–104, 132–139; see BHS Report (25 July 2016), para.136.

(2017) 38 The Company Lawyer, Issue 6 © 2017 Thomson Reuters (Professional) UK Limited and Contributors Analysis 187 not proceed and BHS was, in any event, put into insolvent directors made, whether or not such decisions were liquidation. This is an issue which the directors of TIL2 technically in the best interests of the company. From a should have addressed and, far from “second guess[ing] corporate law perspective, in reality, the interests of Sir the views of the negotiators”,63 it is a proper fulfilment Philip Green and TIL2 (at least while solvent) could be of a non-executive director’s duty to hold management treated as synonymous.67 to account. If a director, having asked this question, does If the directors did not approve the sale for any reason not receive a satisfactory answer then while he cannot he could have removed them or passed a resolution stop the sale from proceeding, he could have his concerns instructing them to approve the sale. Accordingly, to minuted and, as a last resort, resign. In any event, he will argue that poor corporate governance contributed to have done his duty to look after the interests of the BHS’s demise is to miss the point that no minimum level company. of corporate governance was so required. This raises the Michael Todd QC was also of the opinion that “the question: should it be? To impose some type of corporate duties owed by TIL2’s directors to TIL2 were to obtain governance standard on private companies would be, it the best price reasonably obtainable for TIL2 assets, is submitted, wholly impracticable, resulting in an namely shares in [BHS]”.64 Again, while this is the usual unnecessary administrative burden, even for large private formulation of the duty on a sale, it misses out a key companies, with little commensurate benefit considering ingredient: it should have added to the end “in a manner the current (and sensible) state of company law. In any that will not result in immense reputational damage to event, the UK Corporate Governance Code (the Code) is the company”. The economics are key on any sale in the predicated on the basis of “comply or explain”, i.e. public formulation of a director’s duties but they are not the sole companies are free to deviate from the Code but must ingredient.65 The risks involved in a sale to RAL were not come up with a plausible explanation that is acceptable discussed by the full board, and while no claim will ever to their shareholders and the market more generally. Such be made by TIL2 against its directors, that, in itself, is an approach does not work where there is a single not a sufficient basis for directors to abrogate their duties shareholder since there is no constituency to ensure the to a third person, in this case, the sub-committee. spirit of the Code would be upheld. Accordingly, the Select Committee’s comment that “[Lord In addition, who would ensure that whichever code Grabiner] was content to provide a veneer of was in force was followed? The UK Corporate establishment credibility to the group while happily Governance Code works because there is a regulatory disengaging from the key decisions he had a responsibility body, the FCA, who stands behind it. It would make huge to scrutinise”, while harshly put, is probably fair.66 demands on any regulator to ensure that private However, it is a step too far to say the weakness in companies were in compliance. corporate governance contributed substantially to BHS’s demise. The UK Corporate Governance Code does not Proposals for reform apply to private companies—there is no need to have any independent directors, or, indeed, any requirement for In light of TIL2 and Sir Philip Green not having breached non-executive directors to hold management to account. any law relating to the manner of the sale of BHS and Lord Grabiner was not there for any reason other than their dealings with its pension schemes, what reforms the fact that Sir Philip Green wanted him there. No doubt, may be necessary to ensure that a similar problem does there were other good commercial reasons for Lord not arise in the future? Grabiner being on the board of TIL2, but company law In the parliamentary debate to discuss the BHS Report, was not one of them. a whole host of possible areas for reform were raised, Furthermore, it demonstrates a misunderstanding on including constraints on payments of dividends for a behalf of the select committee of the reason underlying company with a pension fund in deficit, compulsory corporate governance. It is there to protect the interests engagement by the company with the trustees and tPR, extension of the CODE to large private companies, and of the company and to ensure, in public companies, that 68 shareholders are given an opportunity to hold the directors more tailored director’s duties. At the outset we should to account. All of this falls away when you have a acknowledge the legal maxim that “hard cases make bad company where there is only one shareholder (i.e. Sir law”. The circumstances surrounding the sale of BHS Philip Green and his family). The only claims which could were extreme—no commercially minded purchaser would be made against the directors of the sellers (on the basis have bought BHS on the terms that RAL negotiated. that this company remained solvent) were by Sir Philip Accordingly, for reforms to be introduced solely to Green. Equally, he could ratify any decision that such capture a case akin to this would both be unnecessary and

63 Lord Grabiner’s letter to Frank Field and Iain Wright dated 6 July 2016, para.15. 64 Taveta Opinion, para.102. 65 Apart from reputational issues, conditionality of any offer will also be key. 66 BHS Report (25 July 2016), para.13b. Lord Grabiner in his evidence to the committee disputes the disparaging remarks made about him. In particular, he says that if he had been at the meeting he might well have asked if there was a realistic prospect of the buyer implementing a turnaround of BHS but he is confident from all that he had heard he would have replied in the affirmative. See Lord Grabiner’s letter to Frank Field and Iain Wright dated 6 July 2016, para.15. 67 Under the Companies Act 2006 and common law, duties of directors are always owed to the company and not its shareholders. In reality the interests of the company and its single shareholder will almost always coincide so that the legal distinction between the company and its single shareholder becomes largely theoretical. 68 Jeremy Quin, Hansard, HC, Vol.615, cols 994–995 (20 October 2016).

(2017) 38 The Company Lawyer, Issue 6 © 2017 Thomson Reuters (Professional) UK Limited and Contributors 188 The Company Lawyer result in an unwarranted constraint on legitimate business company for those payments to be made and the trustees dealing which, itself, could adversely impact on the would have a reasonable basis to get leave of the court pension schemes of the companies so constrained.69 One to challenge the making of such payments. area of reform that is required is to enhance the power of There would need to be an additional amendment to tPR in the manner as discussed above. However, again s.262 Companies Act 2006: since any cause of action for the reasons given, tPR cannot be the sole protector of against the directors belongs to the company, it would be the rights of members of a pension fund, the lead role on open to the shareholders to ratify their acts which would which more naturally falls to trustees. mean that the company would lose the right to bring any Where the true remedy may lie is to give trustees a claim. Indeed, the court is currently unable to give leave right to bring an action against the directors if decisions for derivative action proceedings if the acts have been, were taken that did not promote the success of the or are capable of being, ratified by the shareholders. company by virtue of the directors failing to take into Accordingly, it would be necessary to amend the account their interests. Accordingly, this proposal does section so that, unlike the shareholders’ statutory not seek to promote the interests of the pension fund derivative action, it would not be possible for shareholders ahead of the company but argues that its interests are to to ratify the decision and so prevent directors being held be considered as part of the overall company welfare. It to account. While this does, on the face of it, seem is a major change to allow trustees to bring a claim since illogical—since it is the shareholders who control the currently this can only be done by shareholders. Despite company—there is legal precedent for this. Prior to the this, no substantial legislative changes would be needed rule in Foss v Harbottle70 being reconstituted by the since most of the mechanics are already present in the Companies Act 2006 and the introduction of a statutory Companies Act 2006. Section 172 Companies Act 2006 derivative action, there was a concept of “fraud on the requires directors to promote the success of the company minority” which effectively meant any wrongdoing by for the benefit of the company as a whole having regard those in control of the company could not simply be to, among other things, the interests of employees. The ratified by those wrongdoers. The case law went on to first, relatively small, amendment would be to extend establish that the action in question could only be ratified s.172 to include pension fund members as well as by a majority vote of independent shareholders.71 employees as a relevant factor. Accordingly, the common law was prepared to intervene Clearly, there needs to be a balance between the to avoid majority shareholders prejudicing a minority. legitimate needs of business and those of the pension This proposal is simply an extension of this principle, but fund, so any right for an action to be brought by trustees would need the current law on derivative action to be on behalf of pension scheme members would need to be modified for trustee claims to prevent ratification by carefully constrained so not to create a litigants’ charter shareholders. In addition, any recovery from the directors and avoid trustees putting unfair pressure on a company for loss to scheme members would be paid to the to resort to litigation to illegitimately strengthen its own company, as it is the company’s loss not the pension negotiating position. Any action by the trustees would scheme’s, but this could be addressed by giving the court not be a personal claim against the directors but, it is power to require any sums recovered to be paid directly suggested, would be derivative in nature (i.e. brought in to the pension scheme if it was thought fair and the name of the company). Accordingly, the nature of the appropriate to do so. In respect of the trustees’ legal costs, director’s duty does not change: it remains to promote since this is the company’s action it should be the the success of the company, but the necessity to take into company that pays (provided the trustees can establish a account the interests of the pension fund would have real prima facie case). No doubt, these changes would increase teeth. There is a statutory process already in place under the premiums payable for directors and officers insurance ss.260–264 Companies Act 2006 in respect of derivative but this is part of the cost of ensuring that pension actions by shareholders which could be adapted for claims schemes are properly funded. by trustees. In essence, before any claim could be brought, The situation becomes more complicated on a sale leave of the court would be necessary and the trustees because it will not be the directors of the company with would have to establish, on the balance of probabilities, the pension scheme who make the decision but its holding that the claim would promote the success of the company. company. Is it reasonable for the directors of the seller For example, where there was a significant deficit on a to have regard to the interest of the pensions scheme of scheme without any substantive plan to reduce it within the target in making their decision to sell? This would be a reasonable period, and the directors are declaring large a major change to directors’ duties, since never before dividends, it may well not be in the best interests of the have they been owed to anyone other than the company to whom they are appointed. Perhaps one can argue that

69 See also Alastair Hudson, “BHS and the reform of Company Law” (2016) 37 Company Lawyer 364, where the author makes the case for wholesale changes to the existing framework involving among other things, extending financial assistance back to private companies, restricting payment of dividends to earned income, and the introduction of supervisory boards. Putting the political agenda to one side (the author drafted the Labour Party proposals for reform) these changes are largely unnecessary, fail to address the pensions issues and would amount to a significant interference with legitimate business activity. 70 Foss v Harbottle (1843) 2 Hare 461. This case established the rule that if a wrong is done to a company, then it is the company who is the proper party to bringing an action. 71 Smith v Croft (No.2) [1988] Ch. 114 Ch D.

(2017) 38 The Company Lawyer, Issue 6 © 2017 Thomson Reuters (Professional) UK Limited and Contributors Analysis 189 the moral hazard powers of tPR are sufficient in ensuring the true welfare of BHS pensioners. Sir Philip’s critics that directors of the seller do keep in mind the interests would say the payment of £363 million was only wrung of the target pension scheme. However, given the social out of him once tPR had started enforcement proceedings, importance of appropriately funded pension schemes and and his motivation was to save his knighthood. Even so, the fact that the legislature has already recognised that this is not the whole story, and an astute advocate could persons related to an employer can have liability to fund make a credible case for some leniency. First, as we have pension schemes through tPR’s moral hazard provisions, seen, Sir Philip may have acted unwisely but nothing he it is not too far a jurisprudential jump to extend directors’ did was actually illegal. Secondly, the payment that he duties in this manner. made required considerable negotiation as it needed tPR If this new derivative action was in place at the time and two sets of trustees to agree to it. No sensible business of BHS then, on the basis that the directors had failed person would pay a sum only to have it later contested sufficiently to take into account the interest of pensioners, by tPR or trustees as being insufficient. There is also some Sir Philip Green (through his family companies) would justification in his claim that his treatment before the not have been able to ratify the action of the directors select committee was unfair and biased. In the Taveta since he and they would be beneficiaries of the Opinion, Lord Pannick argues that if this process was wrongdoing. Perhaps Lord Grabiner and other members subject to judicial review it would be set aside for of the TIL2 board would have acted differently if they apparent bias for pre-determination. This was on the basis knew that an action could be brought against them that Frank Field both before and during the process made personally on behalf of pensioners if they did not exercise a comment “which would suggest to the reasonable their duties diligently and reflect upon the impact of the observer that Mr Field had made up his mind before sale on the pension schemes. having all (or any) of the evidence”.72 Of course, such No doubt, there will be many who would see such a proceedings are not subject to such judicial review, so change in the law as an unwarranted interference with the basis of Lord Pannick’s argument is purely theoretical. the ability of companies to do business. That is, of course, It is certainly true that this select committee process did to some extent true, but it is a legitimate intervention appear unnecessarily combative at times but this was, in given the grave consequences that can develop when part, attributable to Sir Philip’s equally pugnacious style. directors ignore the interests of a pension scheme. The The absolute privilege given to its proceedings does mean motivation behind this is not to mire businesspeople in a that wild accusations can be made without fear of judicial wave of litigation—just to provide trustees with the consequence.73 There is, however, a wider issue at stake opportunity to bring a claim in extreme circumstances in here, since if such proceedings are seen as unfairly order to keep damaging behaviour in check. prejudiced against participants then the information given by witnesses will be more circumspect and, indeed, those Conclusion not capable of being required to attend (in particular individuals resident abroad) will just stay away.74 In this Returning to the title of this article, is Sir Philip Green a case, it is difficult to feel too grave a sense of injustice villain or victim? The case for villainy hardly needs to on Sir Philip’s part—the select committee can fairly say be made out—Sir Philip’s lack of interaction with the that the hearings and related public profile associated trustees, the sale of BHS to a person who appeared with them did, at the very least, hold Sir Philip’s feet to patently incapable of running a major retail business, and the flames and facilitate what turned out to be a sensible his performance before the select committee seem to settlement for BHS pensioners. unequivocally point to a person who had little interest in

72 Taveta Opinion, para. 6(3). 73 See generally, on the powers of a Select Committee, Joint Committee on Parliamentary Privilege, Report of Session 2013–2014, HL Paper 30, HC100. 74 For example, Kraft Foods declined an invitation extended by the Business, Innovation and Skills Committee for the company’s CEO, Ms Irene Rosenfeld, to appear as a witness in connection with the committee’s report into its acquisition of Cadbury. The refusal cited, among other things, Kraft’s suspicion that the committee “desire[d] to have a ‘star witness’ towards whom ill-founded allegations and insults can be made …” (“Is Kraft Working for Cadbury?”, 12 May 2011). More recently, the Swiss-based ticket resale company Viagogo declined to send a representative to appear before the committee taking evidence on the business of online ticket sales (BBC News, 21 March 2017).