Lawyers and accountants have dismissed claims that directors of the Millennium Dome could face legal action following a report by PricewaterhouseCoopers (PwC). The report shows that the Dome was insolvent at the time it was awarded its latest £47m lottery handout.
“The report may be warning directors of a possible liability,” says Colin Haig, partner at Baker Tilly. “But in the real world, it doesn’t mean they have a direct liability.”
Wrongful trading was a new piece of legislation put into the Insolvency Act in 1986. It states that if a director knew or ought to have known that a company could not avoid liquidation but continued to trade, then they could be held liable for a contribution to the debt.
According to Haig, though, this is very difficult to prove.
Simon Freakley, turnaround specialist and head of Kroll Buchler Phillips, says that although many cases have been settled out of court, there has been only a handful of wrongful trading prosecutions.
He says: “As long as new money has put the Dome in a solvent position, the slate has been wiped clean. And David James [the executive chairman of the New Millennium Experience] will have a keen focus on making sure the company doesn’t continue to trade if the Dome becomes insolvent again.”
Simon Neilson-Clark, head of business support and the restructuring group at DLA, believes that the Dome is so political that the normal rules go out of the window.
He says the main issue is whether a government minister can be shown to be a shadow director.
“For Lord Falconer to be a shadow director, the company must have acted in accordance with his direction,” he says. “But did the company obey him because he’s a shareholder, a cabinet minister or a shadow director?
“If you follow the point to its logical conclusion, then any cabinet minister could be held as a director.”
Mike Jervis, recovery and receivership partner at Grant Thornton, says that even if the Dome were to go into liquidation, the directors would be able to mount a defence.
“If the directors can prove that they did everything in their power to mitigate the loss to the creditors, then they have a defence,” he says.
Possible defences are having contact with potential buyers, such as Japanese bank Nomura, and the expectation of further grants from the lottery.
Neilson-Clark agrees that it is reasonable to assume someone will want to buy the Dome because of its political status.
However, the general consensus is that the high political profile of the Dome means it will never be allowed to go into liquidation, so discussions of prosecution are purely theoretical.
“Of course, a change of government in the next six months could change everything,” says Neilson-Clark.