Administrators for Festicket have confirmed that a number of the promoters who worked with the collapsed ticketing company are insisting that the money it collected for their shows and events was meant to be held in trust. That would mean that cash was kept separate from Festicket’s own accounts and would therefore be protected from its collapse. However, that is not how the company structured its finances.
Festicket – which also owned Event Genius and Ticket Arena – formally fell into administration last month. As expected, a new report from the company’s administrators blames the collapse on the COVID-19 pandemic and resulting shutdown of live music.
“Following the onset of the COVID-19 pandemic in March 2020, and the resulting lockdowns, social distancing and restrictions on travel, the company experienced an unprecedented level of ticketing refunds and deferment requests due to the multiple event cancelations and a reduction in consumer confidence”, it says.
“The company’s systems were challenged by the new requirements created by the pandemic”, it goes on. “This was further exacerbated by the integration of the Event Genius and Ticket Arena platforms which had not yet completed. As a result, the company’s financial and internal reporting systems became increasingly reliant on manual calculation and input”.
Facing all of those challenges, the company cut its overheads and secured further funding through the sale of approximately £5 million of convertible loan notes and equity. But, the administrators confirm, “this was not sufficient to support its losses”.
Festicket’s debts – other than the administrator’s fees and what is owed to the UK tax authority – come to £22,560,175, of which £18,481.517 is owed to promoters that sold tickets via the firm’s platforms. According to the administrators’ report, 115 promoters are owed money, with a number of those owed in excess of a £1 million, including AEG Presents, Event Horizon, Festco, Lost Paradise Glenworth Valley, Mad Cool and Slammin Events.
In terms of what monies are available to pay off those debts, the administrators’ report confirms the deal to sell Festicket’s assets to Lyft, though – while that transaction safeguarded jobs and removed the collapsed firm’s liabilities to its employees – it only generated £100,000 in cash.
However, there is £5,677,312 in Festicket’s bank account and another £7,690,705 being held by online payment processor Stripe. Though how much of the latter will be paid through to the company depends on various factors, including whether any events for which tickets were sold are cancelled requiring refunds.
But, given the costs of the administration and the firm’s tax liabilities, both of which get paid first, the administrators reckon that the other creditors are likely to see between 10% and 30% of the monies they are owed.
Although, as noted, some of the promoters who used Festicket’s services say that the company was meant to hold any monies it collected from the sale of their tickets in trust. This would mean that the money would have been kept separate from the Festicket business itself, with the company only taking its commissions and fees out of that revenue. Such a system safeguards the promoters should there be problems with the ticketing firm.
But that is not how things were set up. This issue had already been raised by some of the promoters that used Festicket’s platforms.
The Motion venue in Bristol, a Festicket customer, previously wrote on Facebook: “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. If the money has been spent they have defrauded us, the customers and they have also defrauded the government”.
Meanwhile, Ben Street from Wild Paths and the Wild Fields Festival raised this issue when talking about the Festicket administration to Access All Areas.
He said: “This company has had a huge impact on the future of a number of independent event organisers and there is currently no resolution in sight. Their clients’ money should have been held ‘in trust’ but it appears this was not the case. Instead, assets have been stripped and sold onto a large American buyer. The debt remains with the gutted shell company – currently in administration – with big question marks over any sort of fair remuneration”.
Confirming that this issue has been raised, the administrators write in their report: “We have received communications from a number of promoter creditors, who are asserting that the terms of their contract with the company implied that the net monies from ticket sales collected by the company were to be held in trust by the company for the respective promoters. Our understanding is that the company did not segregate or ring-fence any assets for the benefit of specific parties”.
“We are aware that trust claims are a complex area of law and will require expert legal advice which we are already in the process of obtaining”, they add. “For the purposes of our estimates of outcomes for creditors in this document we have assumed that the assets are not subject to trust claims. However, if this were not to be the case this would significantly impact the recoveries for those creditors whose claims were not subject to a trust arrangement”.