Defunct young fashion brand Rare London owed trade creditors £831,627 when it fell into administration in July, following pressure on profits and “ever increasing costs”.
Steven Muncaster and Sarah Bell of Duff & Phelps were appointed joint administrators of Rare Fashion Ltd, trading as Rare London, on 26 July.
The business was insolvent as it was unable to pay its liabilities when they fell due, so it closed immediately. All 56 members of staff were made redundant.
According to documents filed by the administrators, non-preferential creditors are owed £1.6m. This includes trade creditors, as well as a director’s loan, customer returns and HMRC payments.
Former employees – preferential creditors – are thought to be owed around £60,000.
The administrators said they do not expect to pay back either preferential or non-preferential creditors.
The report cited several reasons for the downfall of the business, which was incorporated on 3 January 2013 by Adam Ryan and Neela Talwar.
Returns totalled 50% of all online sales and administrators said the business, which offered free delivery and returns, could not absorb the costs and reduced profit margins.
In June 2016, the drop in the value of sterling caused the company’s already slim profit margins to drop by a further 20%.
To alleviate the pressure, Rare contacted key stockists asking if they would help absorb costs but few were willing to do so, and the company was unable to renegotiate contracts.
In 2015 the company moved into the US for the first time, stocked by Nasty Gal, Forever 21 and Nelly.com. However, in November 2016 Nasty Gal filed for Chapter 11 bankruptcy and Rare London incurred a £400,000 bad debt due to the US retailer’s insolvency.
That same month the directors and their family introduced a personal loan of £91,000 to pay unpaid wages and suppliers.
The brand name Rare London and the domain name rarelondon.com are owned by former managing director Raj Talwar personally, who licensed their use to the company for 3% of turnover.
A number of potential buyers said that, due to uncertainty surrounding a potential purchase or new licence agreement with Talwar, they were reluctant to make an offer for the business. Some said “unrealistic expectations” were being placed on the value of the brand.
Three parties offered between £45,000 and £55,000 for stock.
Asos, a Rare stockist, offered £105,000 plus VAT to buy and resell the stock under the Rare London name. Talwar consented to the sale of the stock on 19 September on the condition that he was paid a licence fee of 35% of the sale price of £36,750.