“Who’s that walking in these woods? Why it’s Li’l Red Riding Hood”!
From “L’il Red Riding Hood” written by Ronnie Blackwell and performed by Sam the Sham & The Pharaohs
Hypebot reports that the PledgeMusic board of directors issued the following statement:
PledgeMusic is still pursuing a sale (which if it happens is likely to be via an administration) but has contingency plans for other insolvency processes if that is not achievable. [emphasis mine]
So what does this mean? I still caution artists that these posts are not legal advance and to take advice from UK insolvency counsel, and the reader should bear in mind that not only am I not a UK lawyer but I’m not a bankruptcy lawyer either. Based on a panel on the Pledge Music debacle I moderated at the Austin Bar Association with two Texas bankruptcy lawyers (who I’m sure would agree that you need to take advice from competent UK counsel) it sounds to me like the company means to pass through “administration” which is a UK insolvency procedure that can be similar to the US concept of liquidation bankruptcy as I understand it. Hence the “…via administration” reference in the Pledge board’s statement above that I highlighted.
I think it is safe to say that anyone purchasing the Pledge assets likely would be unwilling to take them without relief from any obligations to make good on Pledge’s liabilities. In the US, we have a concept of a “prepackaged” bankruptcy where there are buyers for a company’s assets from big assets down to computer monitors who are only willing to buy if they don’t get sued by the creditors. This usually involves getting creditors to agree to low or no compensation with the court blessing the entire plan. I’m not quite sure how this works in the UK since administration proceedings are not typically heard before judges as I understand it, but it sounds like it might be similar. It’s also something that tends to happen most often in a reorganization bankruptcy where the company re-emerges as a whole having shed its debts, instead of a liquidation bankruptcy where the company does not re-emerge at all.
My bet is that everyone knows that an agreement of the creditors (if artists are indeed creditors) will never happen in this case so I would expect to see some muscle being exerted, assuming that the government doesn’t step in to block any administration action pending the completion of any civil or criminal investigations that may be ongoing.
My own curbstone assessment of the board’s statement is that they are going to try to pass Pledge through administration as fast as they can. What that means for artists who were stiffed by the company is anyone’s guess at this point but clearly calls for heightened vigilance.