The Sunday Telegraph - Business & Money
Accountants raise concerns over dividend paid to Dixon’s IWG
ACCOUNTANTS have raised concerns after a £635m dividend was paid to IWG billionaire Mark Dixon’s company by a Jersey subsidiary which was then put into bankruptcy.
An Ernst & Young review of the controversial decision to place Regus plc into bankruptcy in September 2020 is to be followed up with a further investigation into whether the money should have been paid out, court documents show.
Regus plc had guaranteed £790m of landlords’ leases on serviced offices occupied by IWG if it was unable to pay its rent. However, the dividend payment shortly before Covid struck meant there was little money left to reimburse landlords as lockdowns were imposed and IWG sought rent cuts. The subsidi- ary was then put into bankruptcy.
The Royal Court of Jersey transferred the handling of the bankruptcy to Luxembourg, where officials have more limited power to investigate.
Landlords led by New York property firm Vornado have failed in their bid to get jurisdiction moved back to Jersey.
But the Jersey court’s ruling revealed that the Luxembourg bankruptcy trustee, Nicolas Thieltgen, will conduct further investigation into the dividend payouts after receiving a draft report from Ernst & Young.
The ruling said: “The trustee went on to say that their review of the draft Ernst & Young report suggests that there ‘are matters of concern in relation to the 2019 distributions that require further investigation. For the avoidance of doubt, the trustee confirms that he is committed to conducting all such further investigations’.”
A previous report to Vornado from Ey-parthenon, the accountant’s management consultancy arm, also flagged the dividend payout as an area for investigation.
The report, seen by The Sunday Telegraph, said: “In the light of Regus’ limited income generating capacity, and the impact of the Regus distribution on its financial position, it would be necessary for an officeholder to investigate or understand the basis on which Regus’ directors determined that the landlord guarantees should remain with Regus.”
Witness statements submitted to the September hearing by Glen Weiss, Vornado
vice-president, labelled the insolvency as “sudden and suspicious”.
Mr Weiss accused IWG of “using its position to force landlord beneficiaries to accept materially worse terms than they originally (and appropriately) agreed”, as well as changing the name of the subsidiary to “Redox plc” days before the original application for bankruptcy in “what appear to be deliberate attempts … to prevent their creditors from learning about these processes”.
IWG and Mr Thieltgen declined to comment.