Sep 29, 2023 6 min read

Universal and Sony attempt to secure future of Utopia Distribution

Universal and Sony attempt to secure future of Utopia Distribution

Universal Music and Sony Music have filed legal documents known as ‘charges’ through Companies House in the UK which give them wide-ranging control over the assets of Utopia Distribution Services Limited, and provides protection for the wider UDS business.

CMU has been able to confirm today that UDS had to turn to its major label partners to secure the operational financing of the business because its parent company Utopia Music AG was unable to advance funds to its subsidiary.

While this is an unexpected twist to the Utopia saga, it is great news for the UK record industry as it means that UDS - which acquired the assets of Cinram Novum last year - is now effectively insulated, even if only in the short term, from anything to do with its parent company.

“Distribution is an integral part of the music industry and a cornerstone of Utopia’s business strategy”.

The supply and logistics side of UDS was outsourced to DP World in August and this latest move means that, although Utopia Music AG still owns Utopia Distribution Services Limited in name, it has little control over any assets of the company. The only way Utopia Music AG can regain control of UDS is to pay off any financing secured under the charge agreements.

While CMU has not been able to confirm the scale of finance arranged, it is likely that the shortfall is significant, given the recent outsourcing agreement with DP World, in which it transferred its warehousing and most of its staff to them as part of a service agreement.

Although this development is great news for the future of the physical supply chain in the UK, it will do little to dispel persistent rumours that Utopia Music AG has been unable to secure fresh investment and is effectively a zombie company.


The two major record companies recently registered ‘fixed and floating charges’ against the assets of Utopia Distribution Services Limited.

This includes a “first legal mortgage” secured against “all freehold and leasehold property now vested in the company to the extent that it relates to or affects in any way the IT systems, together with all buildings, fixtures (including trade fixtures) and fixed plant and machinery from time to time on that property and to the extent it relates in any way to the IT systems”.

Registration of a charge is a legal process that makes it harder for a business to dispose of an asset without the explicit permission of whichever person or entity registered the charge. A charge may be registered by a money lender, but also by anyone who is owed money by a company.

When a fixed charge is registered against an asset it is effectively impossible for the company to dispose of that asset without permission of the charge-holder, while a floating charge is generally seen as a mechanism to secure a creditor’s status should the company enter liquidation or not keep up with an agreement payment plan.

In these circumstance - often called a “trigger event” - a floating charge can be “crystallised” and converted to a fixed charge, meaning that the asset or assets covered by the floating charge are also restricted.


Utopia Distribution Services Limited is a subsidiary of Utopia Music AG - the Swiss firm that has gone from a much-hyped (but never confirmed) €2.5 billion valuation with more than 1200 employees to a business with a skeleton staff and an uncertain future.

Along the way it has pivoted from being a music data company to a cryptocurrency company to a fintech company to its latest incarnation as - apparently - an AI company.

At one point Utopia expanded significantly through a buying spree that saw it rapidly acquire - and then almost as rapidly ‘deacquire’ - a string of music companies, including Rostr, Sentric Music and Absolute Label Services.

As part of that acquisition activity it also acquired UK physical distributor Proper Music in January 2022 - a long established and well-respected operator in the physical distribution space, run by industry heavyweight Drew Hill. And then, a few months later, it acquired - through Utopia Distribution Services Limited - the assets of bankrupt physical distributor Cinram Novum.

Earlier this year, CMU discovered the exact sequence of events that led to Utopia acquiring Cinram Novum after documents prepared by the administrators were filed with Companies House.

This involved Utopia advancing more than £2 million to Cinram Novum as “unsecured finance”, after Utopia had “expressed an interest in the acquisition of the company in early 2022”. Utopia then converted the “unsecured finance” to a secured loan by registering a wide-ranging fixed and floating charge against the assets of the company on 25 Aug 2022 - just 20 days before administrators were appointed to wind up Cinram Novum.

If a company does go into liquidation, holders of fixed charges are “priority creditors” putting them first in the queue to have debts paid. If administrators of a company are looking to sell the assets of a bankrupt business, a fixed charge can present an obstacle to the sale, because any money coming in must go to pay off the fixed charges before anything else. This means that the holder of a fixed charge is often able to determine what happens when a company is liquidated.

In this case, the fixed and “crystallised” floating charge that Utopia Music AG had registered against the assets of Cinram Novum meant that Utopia was able to acquire the assets of Cinram in a so called “pre-pack administration”, while not having to take on responsibility for most of the debts of the company.


Back to more recent developments, and what is most extraordinary about the wide-ranging charges recently registered against the assets of Utopia Distribution services is that they make explicit and repeated mention of a “first fixed charge” over “all of those parts of the IT systems that are owned by the company and all plant and machinery of the company now or in the future attached to and/or relating to the IT systems”.

They also refer to “all the company’s goodwill and rights in relation to trade secrets, confidential information and know how, each in and/or relating to or in any way in connection with the IT systems”. In fact, the “IT systems” are mentioned 74 times in the thirteen page document.

The charge also prevents Utopia Distribution Services from “entering into any borrowing agreement” other than a “permitted borrowing agreement” agreed with Sony and Universal, and makes specific and detailed provision for what can and cannot be done to computers, data and intellectual property held by UDS - including a prohibition against making “any material alterations to any of the IT systems”.

"Utopia is solvent and remains as the owner of UDS. As a principle, Utopia does not provide any further commentary on its financials or its funding."

When CMU showed the document to a professional familiar with charges, debentures and similar documents, they said: ”It’s unusual to see such specific, repeated and explicit reference to IT systems in a document of this type”.

“Generally a charge will contain either relatively broad terms or will make specific reference to tangible assets such as premises, vehicles or machinery. For this document to make such a big deal about the IT systems means that the secured creditor is concerned about data integrity and operational continuity contained within those systems”.

The document also makes reference to a “loan agreement” and it was this that tipped off CMU to the possibility that UDS had had to turn to Sony and Universal for financing, a fact that we have been able to confirm from multiple sources this morning. There are two possibilities here - either that UDS had to keep hold of money it was due to pay to Sony and Universal or that it had to reach out for finance to meet immediate costs.

If UDS needs to borrow money then, as a wholly owned subsidiary of Utopia Music AG, it would be surprising for the company to turn to Sony and Universal for a loan. If Sony and Universal are owed money and have registered the charges as security in case the company can’t pay up, then that begs the question why can’t Utopia Music AG advance the money to its own subsidiary?

This question has been asked before, when Utopia Music AG suddenly liquidated a string of R&D subsidiaries, including Utopia UK (R&D) Limited, leaving as many as 30 employees unpaid.

At that time, CMU asked a Utopia spokesperson why the subsidiary had been liquidated if Utopia Music AG was solvent, but didn’t get an answer. This latest development will do little stop persistent rumours across the industry that Utopia Music is entering its end game and desperately needs fresh investment to survive.

We’ve approached Utopia’s spokesperson again today to explicitly confirm that Utopia Music AG and its subsidiaries are solvent and viable and able to meet short term liabilities.

The only response Utopia was willing to give us was as follows: “Distribution is an integral part of the music industry and a cornerstone of Utopia’s business strategy”.

“In September of last year, Utopia saved the operations of Cinram Novum (now UDS) and has since significantly upgraded the business and relocated to larger and more modern warehouse facilities. Throughout this process, we have partnered with certain labels that also value the physical distribution market and want to support Utopia in safeguarding its future”.

UPDATE 29 Sep 2023, 3.30pm:

After publication Utopia gave a further comment saying "Utopia is solvent and remains as the owner of UDS. As a principle, Utopia does not provide any further commentary on its financials or its funding."

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