Rangers kingpin faces probe

MPs have already expressed their concern at what they called the "despicable" and "appalling" treatment of staff who lost their jobs last month at the Sports Direct-owned company with no financial compensation when the firm collapsed.

Local MSP Adam Ingram lodged a motion in the Scottish Parliament stating it was understood they were made redundant without prior notice and called for a full investigation and for staff to be paid redundancy money.

It has now been confirmed that the Business Secretary Vince Cable was not given advance notice of the redundancies and that will form part of the USC probe.

When 20 or more employees are proposed to be made redundant, employers have to notify the Secretary of State in writing at least 30 days before the first of the dismissals takes effect.

Failure to do so is a criminal offence under Section 194 of the Trade Union and Labour Relations (Consolidation) Act and those found guilty are liable to a fine of up to £5,000.

Sacked warehouse staff have already complained about their treatment to MPs, claiming they got no notice of dismissals.

Parliament was told in a recent debate by Brian Donohoe, the local Labour MP about the "pantomime" of the collapse of USC which was closed earlier this month because it was not making money.

Jo Swinson, the business minister told Mr Donohoe that "it can be a criminal offence to fail to notify the Secretary of State of proposed redundancies".

When Mr Donohoe asked her if the minister and the Department for Business, Innovation and Skills would take to the criminal courts in the case, she said she could not give any assurance.

But she added: "But I reiterate that we will be looking very carefully at all the facts that emerge and at the picture created from the information that comes from the administrators.

"There is a wide range of both investigation and enforcement powers, and it is important that they are used wherever it is found that companies have not behaved properly, and particularly when directors have not behaved properly."

Where an employer proposes to make 20 or more employees at one establishment redundant within a period of 90 days or less, it is also required to consult with appropriate representatives of the affected employees.

Consultation must begin in good time, and at least 45 days before the first dismissal takes effect in the case of 100 or more dismissals, or at least 30 days in all other cases.

The employer should notify the Business Secretary, typically using an HR1 form.

This gives the government the chance to consider support for the company and its workers.

Ms Swinson has also questioned how Mr Ashley's Sports Direct can get away with employing the majority of its staff - up to 90% of the work force of 20,000 at SportsDirect - on zero-hours contracts.

Ms Swinson said she was "at a loss" at how the use of zero-hours contracts can be deemed to be "in any way responsible" and that there were questions about whether it was in line with employment law.

She said: "Breaking employment law is absolutely unacceptable, and compliance will be properly enforced."

It has been confirmed, that on the back of Ms Swinson's concerns over the case, that the Insolvency Service will also be examining whether Mr Ashley's use of a pre-pack administration was appropriate.

As USC went into administration it was confirmed that another of Mr Ashley's subsidiaries Republic had bought the business.

The Newcastle United owner who holds the strings at Ibrox appointed Philip Duffy and Geoffrey Bouchier ex-Rangers oldco administrators Duff and Phelps and Robert Palmer from Gallagher Partnership as joint administrators for USC at the High Court.

Pre-packs take place where a deal is struck for a sale of an insolvent business before it is formally put into administration.

Companies who take this option say such deals can rescue profitable parts of ailing businesses, saving jobs and offering a fresh start to failing companies.

But they could be banned by the government, when new checks and balances on pre-packs, where the sale is to a connected party, are brought in by the government in the Spring.

It has been punctuated by a review Teresa Graham, a senior accountant, into pre-packs, in a bid to clean up the 'scuzzy nature' of the deals.

Her government-commissioned report found that, although the deals have saved jobs and reduced insolvency costs, many view them as controversial, enabling businesses to offload debts, while unsecured creditors are left out of pocket, despite the business continuing to trade.

It has been confirmed reserve powers through the Small Business Enterprise and Employment (SBEE) Bill currently in Parliament may allow the Secretary of State to legislate over pre-packs.

An Insolvency Service source said: "The Secretary of State was not given advance notice of the redundancies. This fact is one that will be taken into account as part of the Insolvency Service investigation. It would not be appropriate to comment further so as not to prejudice the outcome of such investigations.

"We are investigating the circumstances surrounding the failure of USC including whether the use of pre-pack was appropriate...

"If in the course of investigations we find criminal behaviour, we will report this to a prosecuting authority."

The source added: "There is nothing in law to prevent the owner of an insolvent company from purchasing its assets for use in a new venture, provided their offer is the best that can be achieved and the transaction is genuine and transparent.

"Pre-packs can offer a flexible means of rescuing a business that would, due to adverse publicity, quickly lose value and collapse if it were marketed over a longer period.

"By preserving the business' value, creditors can receive more of their money back. By rescuing businesses that would otherwise have to be wound up, pre-packs can save jobs that would otherwise be lost."

Sports Direct would not comment. Mr Ashley was unavailable for comment