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The sale and acquisition of BHS inquiry launched

28 April 2016

The Business, Innovation and Skills Committee launches an inquiry looking into the sale and acquisition of BHS. The inquiry focuses on a number of matters relating to company law and, among other issues, examines the steps taken by Arcadia Group to ensure that Retail Acquisitions Limited (RAL) was a responsible owner. The inquiry also looks at what checks were undertaken by RAL to verify that BHS was a going concern.

Chair's comment

Iain Wright MP, Chair of the Business, Innovation and Skills (BIS) Committee said:

"The collapse of BHS brings misery and uncertainty for thousands of workers and also places a potentially significant burden on the taxpayer in the form of pension liabilities. The sale and acquisition of BHS raises real questions about whether directors acted in the best long-term interests of the company and their employees. Is there too much of an incentive in the system for owners to asset-strip, take out vast sums for personal gain, and then dump and run leaving the taxpayer to pick up the tab when the company fails, rather than create value for the long-term? In this inquiry we'll want to question the role of advisers – the lawyers, bankers, auditors and others who advised on the sale and purchase of BHS – and examine the legal obligations of company directors in this process".

The witness list is to be decided in due course in consultation with the Work & Pensions Committee, who are holding a separate inquiry into pensions regulation and the Pensions Protection Fund.

The Business Committee inquiry wishes to examine these issues in specific relation to BHS to inform a potential wider inquiry into the effectiveness of the regulatory framework governing mergers and acquisitions.

Terms of reference

  • What due diligence checks were Retail Acquisitions Group required to conduct by law prior to purchasing BHS? What checks where undertaken to verify that BHS was a going concern?
  • What steps if, any did, Arcadia Group take to give it assurance that Retail Acquisitions Group were a responsible buyer?
  • What was the role of external advisers during the sale and acquisition process, particularly bankers, lawyers, accountants and auditors conducting due diligence checks on behalf of Arcadia Group?
  • Did the regulatory framework incentivise or mitigate moral hazard?
  • Did directors act as best they could to fulfil their statutory duties? Are the statutory duties on directors regarding the sale or purchase of businesses or subsidiaries, and the potential consequences of breaching these, sufficient?

Further information

Image: PA