4:26 pm, May 8, 2024
Failed online retailer Cazoo today said it will be appointing administrators for some of its subsidiaries incorporated in England.
It follows the bombshell statement it made less than a week ago in which it told the New York Stock Exchange – where it is listed – that it had failed to secure any new funding and could soon fall into administration.
In a statement to the Securities and Exchange Commission (SEC) in the USA today, posted in the afternoon UK-time, Cazoo Group said that notices of intention to appoint administrators had been filed with the High Court here concerning certain material subsidiaries of Cazoo Group Ltd, namely, Cazoo Holdings Ltd, Cazoo Ltd, and Cazoo Properties Ltd.
Cazoo Ltd is its operating subsidiary via which its marketplace business – to which it recently transitioned from online used car sales – is conducted.
The notice gives Cazoo a certain amount of protection, since it means that any creditors are generally prevented from taking debt enforcement action without court permission.
This moratorium will last until administrators are appointed or 10 business days expire without administrators having been appointed.
Once administrators are appointed, an administration moratorium takes effect.
Car Dealer has contacted Cazoo for a comment.
Cazoo Holdings Ltd is a holding company that has no material assets other than an ownership interest in the group’s subsidiaries, while Cazoo Properties Ltd owns the majority of its leaseholds, with each of them being a subsidiary themselves.
The notice to the SEC, which is an independent agency of the US federal government and protects investors as well as enforcing the law against market manipulation, has been made in accordance with the requirements of the UK Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016.
Car Dealer reported as far back as last December that Cazoo had said it faced going under.
Last week’s announcement also included news that Cazoo had missed the deadline for reporting its 2023 accounts – because of pressures on management – and that CFO Paul Woolf had left the business.
His departure followed that of Cazoo founder Alex Chesterman and former CEO Paul Whitehead, who both left the company in the past few months.
Following the announcement, Michael Lynch, a partner at law firm DMH Stallard who specialises in insolvency and business restructuring, said: ‘It appears that Cazoo Group has necessarily taken steps to ward off creditor pressure.
‘Those companies will now benefit from an interim moratorium, meaning creditors cannot take any action with regard to their debt position.
‘It is likely that Cazoo’s lenders will have been, at the very least, aware of the notices of intention and in discussions with Cazoo’s management board to effect some plan, whether that is a sale of a business as a going concern out of administration, or whether it provides breathing room to effect a restructuring plan or scheme of arrangement.
‘Separately, when a company is insolvent, it is often prudent for the directors themselves to seek independent legal advice, bearing in mind the creditor duty that bites and other Insolvency Act claims that may come to the fore.
‘It may be that the board, bearing in mind their own director duties, felt compelled to take action.’
He added: ‘Ultimately, Cazoo’s expenditure appears to have exceeded its income, leaving a hole with its creditors and, likely, sponsorship gaps in some sporting arenas.’
This article was originally published at 4.26pm on May 8 and updated with the comment from DMH Stallard at 10.22am on May 9
