Simclar insolvency cases reach Scottish courts

The unraveling of controversial Scottish manufacturer Simclar Electronics took another couple of steps forward this week, with reports that founder Sam Russell had reached an out-of-court settlement with liquidators over an alleged illegal dividend paid out before part of the company went into administration.

Meanwhile, workers from another subsidiary’s Dumfermline factory won £1.1m when an employment tribunal decision ruled that they had been made redundant without due consultation.

Russell founded Simclar Electronics in Fife with government backing in 1976 and built up its business supplying compontents to bus manufacturer Alexander Dennis. In subsequent years, it opened factories in Irvine and Kilwinning, Ayrshire, and subsidiaries in Mexico, the USA and China.

The court action scheduled for a hearing in Edinburgh on Tuesday stemmed from £3m allegedly paid by Simclar Ayrshire in illegal dividends to the parent Simpclar Group in June 2006, just a few months before Russell called in PricewaterhouseCoopers as administrator/liquidator for the Ayrshire subsidiary in 2007.

But as the legal teams gathered at the Court of Session, PwC’s lawyers said the liquidator had reached an agreement with Russell and his fellow directors, John Ian Durie and Stephen Donnelly, heraldScotland reported. Details of the agreement were not published.

While the dispute over dividends at Simclar Ayrshire was continuing, Simclar Group and three other subsidiaries (Simclar International, Simclar Security Technology, Simclar Interconnected Technology) went into administration in June 2011. Joint administrators from Deloitte closed the Dumfermline factory with the loss of 138 jobs. They also decided that it would not be in the best interests of the creditors to try and contest the PwC claim on behalf of the Ayrshire subsidiary.

The former group employees pursued various claims through the employement tribunal, which ruled that 104 of them were entitled to awards worth £1.1m, the Courier reported. The main thrust of the case was administrator’s failure to undertake the 90-day consultation process before being made redundant, but 12 employees had claims for unpaid holiday pay upheld and one has won an award for dismissal for trade union activities.

The Simclar Group’s subsidiaries in United States, Mexico and China are unaffected by the UK administration. 

Continued...