Share suspension and collapse into administration
Trading in the shares of Patisserie Holdings, the parent company of Patisserie Valerie, were suspended on 10 October 2018 following the discovery of potentially fraudulent accounting irregularities, which had led to the possibility that there had been a material misstatement of the company's accounts. It was widely reported in the press that there was a multimillion pound black hole in the company's accounts. Luke Johnson, the company chairman, said: "We are all deeply concerned about this news and the potential impact on the business".[11][12]
In October 2018, the company announced that there was a material shortfall between the reported financial status and the current financial status of the business and that without an immediate injection of capital the directors were of the view that there would be no scope for the business to continue trading in its current form.[13] Following the announcement, Hertfordshire police issued a statement that: "A 44-year old man from St Albans has been arrested on suspicion of fraud by false representation. He has been released under investigation." It was widely reported that the individual concerned was Chris Marsh, the firm's finance director.[14][15] The Serious Fraud Office announced on its website that it had opened an investigation into an individual at the company.[16] Later that day the company announced details of a rescue plan under which it would borrow £20 million from Johnson[17] and place 31,451,100 ordinary shares at 50 pence to raise new capital of approximately £15.7m before payment of expenses.[18] The rescue plan prevented the imminent bankruptcy of the company and subsequent loss of 2,500 jobs, but was criticised in The Daily Telegraph as being against the interests of smaller shareholders.[19]
On 14 October, it was reported that two unauthorised and unreported overdrafts of almost £10 million had been discovered.[20]
On 22 January 2019, the firm announced that it had collapsed into administration following failed talks with banks, which the company stated was a "direct result of the significant fraud".[21] The collapse lead to the immediate closure of 70 of the nearly 200 stores and concessions operated by the group - including both of its original flagship branches in Soho - leading to the loss of around 900 jobs.[22]
In November 2018, the Financial Reporting Council (FRC) had launched an investigation into accountant Grant Thornton's audit of Patisserie Valerie. In November 2020, the Joint Liquidators said: "We can confirm that the joint liquidators of companies within the Patisserie Valerie Group have issued a claim for damages against Grant Thornton in respect of their audits of the group companies' financial statements for the financial periods 30 September 2014 to September 2017 inclusive", as the findings of the investigation were awaited.[23] Following the investigation, Grant Thornton was fined £2.3m because it had "missed red flags" and failed to "question information provided by management".[24]
