The Memo: Wilko collapse: What happens when a company goes under?

Group 723.png

Wilko collapse: What happens when a company goes under?

Emily Dunham – 18 December 2023

If you’re searching for some bargain stocking fillers this Christmas, you might be feeling the loss of Wilko after the retailer collapsed earlier this year, closing its 400 stores and putting over 12,000 jobs at risk. When big companies like this collapse (remember Woolworths anyone?!), the tangle of resulting legal issues generally means that there’s plenty of room for lawyers get involved. So, what exactly does it look like?

Midlands-based national law firm Shoosmiths was appointed as the lead firm for the company in the administration process, with Pinsent Masons also brought in. For Shoosmiths, the case isn’t anything new. The firm has plenty of experience with high street retailers on the brink of collapse, having acted for Joules when it was rescued by Next, and for the administrators of Cath Kidston when it was also acquired by the clothing retailer back in March. More recently, they also acted for Tesco when it bought Paperchase in February. Though this latter deal was a little different, with Tesco buying Paperchase’s brand and the intellectual property that comes along with that, but not its physical stores.

The legal challenges that come with the collapse of a company as big as Wilko are varied and complex. The scale of the company means that every issue becomes significant, with the business sold in different parts to different people. Legal responsibilities associated include things like responding to creditors taking enforcement action to get their money back, and considering potential transactions with interested parties. There are also issues relating to the physical stores of the company; store portfolios need reviewing, and landlord letters requesting rent concessions need issuing too. Supplier contracts must also be reviewed, and the company will need advising on stock that’s held in transit, in warehouses, or in distribution centres. There are also discussions to be had regarding the company’s pension scheme, the retention of title clauses, and any outstanding litigation matters through in-house lawyers. Phew, that was a lot to get through!