Crowdfunders lose out in Front Up Rugby sale
 
Tue, 21st October 2014
 
 

Crowdfunders lose out in Front Up Rugby sale

By Edward Devlin, Senior Digital Staff Writer

Investors from a crowdfunding website are set to lose hundreds of thousands of pounds from the administration of Midlands clothing brand Front Up Rugby, new documents have revealed.

The Sutton Coldfield-based rugby clothing company was acquired in a pre-pack deal by international knitwear brand Lyle & Scott in September 2014.

Front Up, established by Jon Allen in 2005, had been popular with investors on Crowdcube with two rounds of funding easily hitting their targets and being oversubscribed.

It secured more than £230,000 from hundreds of backers across the two pitches in 2012 and 2013 after sales and the business' reputation continued to grow.

Allen had sold his unique brand of sportswear at pop-up shops in places such as Covent Graden in London and in concessions in the likes of Debenhams and House of Fraser.

However, despite its rapid growth and optimism about its future success, Front Up fell foul of a struggling retail sector with difficult trading conditions hitting its cashflow and leading to arrears with HM Revenue & Customs.

The largest creditor, however, was the provider of its warehouse and distribution centre, Intelligent Fulfilment (IF), which housed the company's stock.

A stop was placed on all orders as a result of an increasing liability to IF which led to trading coming to a standstill in August 2014.

Front Up had attempted to raise fresh funds from Crowdcube – which it had advised of its precarious position – to solve its cash worries, but no more money was forthcoming.

Ultimately, insolvency firm Poppleton & Appleby was appointed as administrator over Front Up Retail Ltd on 1 September 2014, after being introduced to Jon Allen earlier in August by the directors of Lyle & Scott.

The Scottish fashion house had already showed an interest in buying the rugby brand.

A pre-pack deal was struck with Lyle & Scott agreeing to buy the goodwill, including all trademarks, databases, URLs and websites, for £20,000 and the stock for an immediate payment of £11,500 and a deferred amount of £10,000.

The £11,500 has been used to settle the claim of IF and Lyle & Scott also agreed to pay off the amount owed to HSBC for the overdraft – about £9,000 – on top of the sale price.

It means there is a possibility trade creditors (owed £32,000) and HMRC (owed £19,000) may receive as much as 44p in the pound from the remainder of the sales proceeds.

However, shareholders of Front Up Rugby, including hundreds of Crowdcube investors who paid amounts ranging from as little as £8 to several thousand, will not be seeing any of the £335,320 they pumped into the business.

Founder and managing director Jon Allen, who owned a 25 per cent stake in the company, was taken on by Lyle & Scott as part of the pre-pack but only as an employee not a director or shareholder.

 
 
category Midlands  |  source Insider Media