The administrators of Festicket have published their latest report, revealing that payment processor Stripe is still holding more than £5 million from tickets sold by the defunct UK ticketing company. Mainly because a number of promoters that used Festicket have claimed that they have an “implied trust arrangement” with Stripe, which would allow those promoters to make a direct claim against Stripe for money they were owed by Festicket prior to its collapse.
“Stripe are (understandably) nervous about passing funds over to us”, the administrators write. “The main reason for their nervousness appears to be because a few promoters have contacted Stripe to intimate that Stripe have an implied trust arrangement with them because of the manner in which they traded with Festicket. Accordingly, Stripe have been advised by their lawyers not to hand over funds to the company”.
Festicket appointed insolvency practitioners ReSolve Advisory in September 2022 after seemingly becoming a victim of the impacts of the COVID pandemic on the live music sector.
After the company announced that it was insolvent, about 40 promoters that had sold tickets via the Festicket platform claimed that the implied terms of their contracts with the ticketing business meant money from the sale of their tickets should have been held in trust.
If that was the case, that money should have been kept separate from Festicket’s own accounts and would therefore be protected from its collapse.
Speaking at the time the company became insolvent, a number of promoters said in public statements that money from ticket sales for their shows should have been “held in a client account” or “in trust” by Festicket, but it appeared that the company had not done that.
Bristol club Motion said, “The funds we are due, quite simply, should not have been moved from the holding account, as Festicket does not pay VAT on this money due to client account regulations with them acting as a merchant”.
Previous updates from Festicket’s administrators have made it clear that this is not how the company had structured its finances, but promoters affected by the ticketing company’s insolvency maintained that money sitting in Stripe belonged to them, and should therefore not be used by the administrators to settle the wider debts of the company.
In an attempt to resolve the matter, the administrators took the case to court seeking guidance from a judge as to whether the wording of Festicket’s contracts with promoters meant that an implied trust existed. If an implied trust did exist, then the money would be owned by the promoters and not by Festicket, meaning it should be released to the promoters and would not be able to be used to settle the insolvent company’s debts.
After hearing the case over two days in March, the judge said that she needed more time to explore the matter and, having done so, issued a written ruling ten weeks later in June. According to the new report, “the judge ruled that the wording of the standard contracts does not, in itself, establish a trust between the company and the event promoters”, adding that the judge had also ruled that this decision could not be appealed.
However - as is apparent from the fact that the judge needed several weeks to consider the matter before issuing a judgement - this is a complex matter, and that ruling hasn’t settled everything regarding how the money sitting in Stripe should be dealt with.
The administrators reveal that there are ongoing claims relating to “certain non-standard contracts” with AEG Presents and “three other promoters making claims under German law”, all of which mean “funds held in the administration could still be subject to trust claims”. It is thought those claims together amount to around £3.9 million.
At the point Festicket fell over, Stripe was sitting on just shy of £7.7 million of money collected from ticket purchases made through Festicket. It initially sat on that money because it knew there could be customer chargebacks that it would have to honour.
According to the administrators, following those chargebacks there is now £5.39 million still held within the ticketing company’s Stripe account. Two years on, the chargebacks have pretty much stopped, but there is the separate issue of certain promoters claiming to have an implied trust arrangement with the payment processor.
“We continue to press Stripe to pass funds over to us, as holding onto these funds is to the financial detriment of the general body of creditors”, the administrators add. Quite what will be required to enable Stripe to hand over the money is not entirely clear at this time.
With the case now taking on additional complexity, due to the cross-jurisdictional nature of the claims under German law, it is far from certain that the Festicket administrators will be able to get their hands on the money any time soon - if at all.
It may well be that the administrators have to take a pragmatic approach regarding the funds being held, rather than expend significant time and effort in legal wranglings that may reduce what money is available for creditors.
As a global payments company with a detailed understanding of financial regulation around the world, Stripe is likely to be experienced in these sorts of issues, and will most likely have relevant expertise in-house to allow it to ensure an appropriate outcome that is in tune with the regulations in the relevant jurisdictions.
Festicket’s assets were bought by US ticketing company Lyte. That deal didn’t generate much cash to help pay off Festicket’s debts, though it did safeguard some jobs. For a time. Because, of course, Lyte also recently ceased trading.
