Serial phoenixers give us all a bad rep
Monday, February 6, 2017
The print industry, like many others with room for consolidation, has a bustling M&A market, which in an ideal world would be characterised by honest, straightforward transactions where jobs are saved and credit lines secured.
Sadly though, we don’t live in an ideal world and occasionally, in the grey area of pre-pack deals, we see the repeated phoenixing of businesses that, either through sharp or dubious practices, leave a trail of misery in their wake.
The latest instance of this unwelcome phenomenon centres around print farmer UK Print, which was incorporated in November 2014, but only began trading in the run-up to the demise of another print farmer: Houseprint, trading as The Printing House, in October 2016. UK Print and Houseprint were both apparently run by the same two people.
Houseprint was placed in compulsory liquidation after it was accused by a string of customers of taking deposits for jobs and not delivering on time or to specification. The same accusations are now being levelled at UK Print and it seems as if the cycle may be about to begin again as a new business, Ink Paper Ltd, was incorporated on 30 November 2016 with the director of UK Print and Houseprint listed as its director.
“I would like to see the print industry pull together to develop some sort of system of vetting itself; a kitemark perhaps,” says Chris Hastings, author and founder of book publisher Senlac Hill Publishing.
Hastings himself fell victim to UK Print’s alleged practices when he attempted to have his crowdfunded book George the (Almost) Fearless Mouse, printed by the outfit.
“There are people like us who are not au fait with the printing industry but are willing to get our feet wet, and there are hundreds like us who could fall victim if there are other sharks out there.”
The book, which Hastings wrote to highlight the issue of high sensitivity in children after his daughter was diagnosed with the condition, was due to be printed for Christmas 2016. But after weeks of excuses and missed deadlines, Hastings demanded a full refund of the £2,000 he had paid upfront. The refund was paid after he threatened to go to the local press, but he feels that the changing shape of print and publishing means many people could be vulnerable to similar operations.
“There is a lot of scepticism about print farmers but we are living in an age when there are lots of small start-ups and individual publishers, and they want to go further than using Amazon’s CreateSpace publishing platform, but they don’t know how to navigate the print industry.
“It means the potential for sharks to feast on self-publishers and indie authors, who are springing up by the thousands, is huge.
“The industry needs to realise they are dealing with a lot of people who are new to this kind of thing, and work out a way to regulate itself,” he asserts.
The question of regulation and policing of directors and their businesses that appear to be serial phoenixers is a big one. Who is responsible? How can they be stopped? Should there be a kitemark approach or should a harder line be taken such as the government’s tactic of naming and shaming of businesses paying below the minimum wage?
“The issue with a kitemark system is the sheer cost of administering it,” says BPIF chief executive Charles Jarrold. “As an industry, trading online is becoming a bigger part of what we do, and so, yes, we would consider looking at a kitemark system if we saw that it was something we could deliver and there was an appetite for it. But it’s weighing that up in the list of priorities. We have finite resources and we have to focus those on the immediate needs of our members.”
Jarrold feels there should be a collective level of responsibility, as an industry, to ensure that standards and honesty are upheld, but that that onus doesn’t solely lie with printers.
“The buyer has a responsibility as well. If you’re going to place an order and pay a significant amount of cash up front, you should probably take the same amount of care you would handing cash over to anyone you don’t know,” he says.
Chief executive of print industry credit specialist ICSM, Ian Carrotte, believes the kitemark system wouldn’t work because the print community wouldn’t be prepared to fund it. He suggests a requirement set by a body, such as the Institute of Directors, that people must attain to be eligible for directorships.
“The law needs to change. You need more qualifications to be a forklift truck driver than you do to be a director of a highly technical print company,” he states.
“The print industry is more prone to this sort of thing. It’s an old-fashioned industry and in many cases people are too trusting,” says Carrotte, adding: “The self-publishers are also at greater risk from these types of rogues due to their lack of experience and their naivety.”
Cheryl Lambert, chief investigator at the Insolvency Service, says a starting point is to follow up trade references and directors’ credentials and report anyone with suspicious dealings to the service. A phoenix business is itself not a sign of dishonest or criminal activity.
“Find out why the previous company failed and ensure the directors aren’t serial abusers of the phoenix company arrangement,” she states. “The Insolvency Service investigates directors involved in a pattern of serial phoenix failures and considers the facts of each case with a view to disqualifying them if the evidence supports it.”
However, Carrotte believes that the disqualification protocol is too weak, calling it “a toothless tiger” and saying rogues take no notice of it. He believes it should be stricter and that, if legally possible, a list of all directors with their failed businesses should be made easily available, on Companies House, for example, so that trails would be easier to identify.
Hastings supports the idea of total transparency and says that without it and with the growing trend for online transactions, the industry may find that its customers could be the very people to name and shame them, in a similar way to holiday and hotel review sites.
“If the print industry doesn’t wake up to this they might start to find that authors and indie publishers, for example, will start doing it for them,” he says.
“The industry needs to start looking at how it is possible to safeguard its own reputation and its clients.”