Bell Pottinger in administration: redundancies begin, shareholders grumble, what's next?

It was confirmed on Tuesday that Bell Pottinger had gone into administration. What happens next?

Bell Pottinger in administration: redundancies begin, shareholders grumble, what's next?

PRWeek hears that around 60 staff in the business were made redundant on Tuesday afternoon, shortly after BDO confirmed publicly that it had been appointed as Bell Pottinger's administrator. This included a small number of partners who while technically self-employed and therefore not made redundant per se, were told they need not return to work.

Employees of the business, but not partners, should be paid until the end of the month, and the business itself is likely to shut its doors by the end of the month.

Neither the company nor BDO commented on this report, or any other points put to them by PRWeek.

Tuesday's redundancies would leave up to 100 staff in the business in the UK, more than 30 of whom are partners. Those partners may be liable for tax bills, together totalling a sum of up to £1m, according to The Times.

As BDO made clear in its Tuesday announcement, Bell Pottinger's subsidiaries outside of the UK continue to trade - the Asian business has announced a rebrand, while the Middle Eastern operation is also seeking a full separation from its parent. The non-UK operations employ in excess of 50 people, the PRWeek Global Agency Business Report shows.

The firm's Twitter account, @BellPottinger, has been taken offline.

Administrator role

PRWeek understands that BDO has attempted to stop staff from taking business away with them, including by asking for a cut if partners earn fees from advising current clients in the future.

While several rumours circulated last week about other companies looking to buy the business - Lewis, which flatly denied this report, among them - the fact of having gone into administration suggests no buyer has been found, according to Esther Carder, media specialist partner at the accountancy firm Kingston Smith.

Carder said: "Whether anyone will be prepared to buy business [i.e. client relationships] that they could potentially just take on within a new or existing PR shop is doubtful, given so many clients and key personnel have already left. The value of a PR business lies with the relationships between personnel and the clients and so it is now a free-for-all."

Work for those clients who have not cut ties with Bell Pottinger can continue during the administration process - subject to Bell Pottinger having the necessary staff. This will largely consist of planned projects being concluded and assisting with scheduled financial announcements for certain clients.

As administrator, BDO's primary role is to realise value for Bell Pottinger's creditors - although this would not oblige them to sell the company at for a below-value figure. The business is believed to be £6m in debt.

Legal possibilities

Tuesday's statement from BDO included a line saying the accountancy firm "had taken appropriate steps to preserve the rights Bell Pottinger may have in relation to the failure of the business".

A lawyer told PRWeek that this might indicate an intention to take legal action against those seen as responsible for its downfall, such as the team involved in the work with Oakbay, which led to Bell Pottinger's expulsion from the PRCA.

Meanwhile, it was reported earlier this week that two of that team had instructed lawyers to examine their legal options. These two, as reported by the Evening Standard, were Victoria Geoghegan, the partner sacked by the business in the summer, and Nick Lambert, another member of her team who was suspended and then left the business late last month.

Shareholder angst

PRWeek has also been told by one shareholder that Bell Pottinger had not paid any dividends to shareholders since its 2012 MBO, as profits were being used to pay back the financiers of the buyout. The first dividends were due to be paid this year.

That shareholder told PRWeek that the failure of the business should be attributed to the management of the company, as well as the particulars of the controversial Oakbay account, saying: "There is now a very large and growing list of people who would wish to ask a lot of searching and serious questions of the board - and a lot of people who would want to punch Messrs Henderson and Bell on the nose."

John Harrington also contributed to this report

Read next: 'No other option' - Bell Pottinger enters administration

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