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Kate Middleton's scandal-hit designer: Its investors are furious 

From its soft A-line silhouette to the eye-catching floral print, the dress the Duchess of Cambridge wore on a visit to East London last week was undeniably flattering.

The £550 Calla number is by Beulah, whose founders are personal friends of the Duchess. She is not the brand’s only famous fan, either.

Since Lady Natasha Rufus Isaacs (the daughter of the 4th Marquess of Reading and ex-girlfriend of Prince William) launched the label with her equally glamorous friend Lavinia Brennan in 2010, Beulah has been worn by celebrities from Kate Moss to Holly Willoughby and Princess Beatrice.

An ethical brand borne out of the duo’s desire to help female victims of human trafficking, and from which 10 per cent of profits are donated to charity, the women’s intentions appeared as admirable as their connections were impeccable.

But in July this year, the label went into liquidation. Theirs was not, of course, the first fashion house to fall foul of the pandemic, and given that Beulah specialises in the sort of eveningwear and formal work clothes that have become all but obsolete during lockdown, its demise might have appeared inevitable.

Since Lady Natasha Rufus Isaacs (the daughter of the 4th Marquess of Reading and ex-girlfriend of Prince William) launched the label with her equally glamorous friend Lavinia Brennan in 2010, Beulah has been worn by celebrities from Kate Moss to Holly Willoughby and Princess Beatrice

Since Lady Natasha Rufus Isaacs (the daughter of the 4th Marquess of Reading and ex-girlfriend of Prince William) launched the label with her equally glamorous friend Lavinia Brennan in 2010, Beulah has been worn by celebrities from Kate Moss to Holly Willoughby and Princess Beatrice

What is surprising, however, is what happened next — because just two weeks after the liquidation process was completed, the pair breezily declared that the business was ‘back up and running’.

Having gone into voluntary liquidation, Beulah had been put up for sale. It emerged Natasha, 37, and Lavinia, 33, had formed another company, and made a successful £210,000 bid for their fashion brand.

In doing so, they regained control of their company and swiftly wiped out almost £1 million of debt.

It’s entirely routine business practice. But while some might admire their decision to bring their business back from the dead, the shareholders and creditors whose money has been lost might be less impressed.

Those who invested or are owed money from Beulah include the Duke of Westminster, dozens of small firms and even a charity against human trafficking (although, reportedly, they have since been paid back).

While there is no suggestion that Beulah did anything illegal, the conduct of a brand that has built its reputation on ethical values has left something of a bitter taste.

Having gone into voluntary liquidation, Beulah had been put up for sale. It emerged Natasha, 37, and Lavinia, 33, had formed another company, and made a successful £210,000 bid for their fashion brand

Having gone into voluntary liquidation, Beulah had been put up for sale. It emerged Natasha, 37, and Lavinia, 33, had formed another company, and made a successful £210,000 bid for their fashion brand

‘I did note the irony that they boasted of working to support women workers in developing countries, but, frankly, they don’t seem to have cared too much about how I am supposed to pay my staff who actually made their products here in Essex,’ says Neil Stock, owner of Harlequin tailors, which, as of last week, was still owed £4,230 for belts made for Beulah.

‘For a small company like ours it is a massive amount of money, and I had to transfer funds from my own personal savings to be able to pay the staff wages.’

Such is the growing anger towards Beulah’s founders that several are considering group legal action to recoup their money.

Shareholder Niall Brennan (no relation to Lavinia), one of three on the board of directors in addition to its founders, has lost £100,000. In a letter to other shareholders seen by the Mail, all three directors wrote that they felt that the founders’ actions had been ‘completely unethical’.

Fellow board member Andrew Wood, an investor based in Singapore says that, like Brennan, he only invested in Beulah to support its ethical mission.

American philanthropist Mary Demetree, their largest creditor, ploughed £400,000 into Beulah in July last year. 

She says that when the company went into voluntary liquidation, her cash went with it — and she only learned that the women had gone back into business after reading about it online. 

‘I am shocked. Everyone’s just lost all their money and they’re going about business as usual. It just seems so unethical,’ she says.

So how did a company with the huge draw of the Duchess of Cambridge manage to end up in such dire financial straits?

The pandemic played a part — potential customers had no need for smart office-to-party dresses costing £650 when they were stuck at home. 

By committing 10 per cent of profits to charity — via the company’s Beulah Trust that invests in organisations fighting to eradicate modern-day slavery — the firm also had less of a financial buffer than most.

Demetree, who sat on the board of directors from July last year to May this year, wonders if management errors were also to blame: ‘I don’t think they’re business people. It seemed to be about image and staying in Hello! magazine.’

Demetree says she was introduced to Natasha and Lavinia, in around 2018, by a mutual friend. Rufus Isaacs and Brennan (pictured in 2018) had by then raised £1 million since 2015 from investors attracted by their philanthropic mission

Demetree says she was introduced to Natasha and Lavinia, in around 2018, by a mutual friend. Rufus Isaacs and Brennan (pictured in 2018) had by then raised £1 million since 2015 from investors attracted by their philanthropic mission

Yet a source close to Beulah said mismanagement played no part, and that revenue in February (before Covid-19 struck) was 10 per cent ahead of target.

Demetree says she was introduced to Natasha and Lavinia, in around 2018, by a mutual friend.

Rufus Isaacs and Brennan had by then raised £1 million since 2015 from investors attracted by their philanthropic mission. 

Their business model was prompted when the pair — childhood friends — travelled to India in 2009 to teach women who had been rescued from sex trafficking to sew. Alarmed by the ‘total culture shock’, the pair decided to found a fashion line, with designs sustainably made by women there, improving employment for disadvantaged women.

Their business model impressed Demetree, whose family’s property business also seeks investment opportunities. ‘I loved them both,’ she says.

The following June they called her to ask if she was interested enough ‘in the fashion brand and all the philanthropy that went with it’ to invest what will sound, to many, an eye-popping sum.

‘I think they wanted £650,000, £700,000, even more,’ says Demetree — a figure denied by a source close to Beulah, who claimed the women were seeking a total ‘seed investment’ of £1.1 million. ‘They wanted me to help them come into the U.S. market. I love fashion. It was a win-win. I wanted to help.’

What Demetree didn’t want to do, however, was hand over money in return for shares in the company, preferring the usually less risky strategy of remaining a creditor and receiving interest on her loan. It was, she says, a persistent bone of contention: ‘They wanted us to put in half a million — or more — to gain 10 per cent of the company. We wanted quarterly interest. They were never happy with that arrangement.’

¿It¿s lovely to see celebrities in our clothes. When Holly Willoughby wore our shirt-dress on Instagram, it crashed the website,¿ Lavinia once said. ¿But if I¿m on the train and see someone with one of our scarves, that¿s just as exciting¿

‘It’s lovely to see celebrities in our clothes. When Holly Willoughby wore our shirt-dress on Instagram, it crashed the website,’ Lavinia once said. ‘But if I’m on the train and see someone with one of our scarves, that’s just as exciting’

A source close to Beulah claims that the arrangement was always that Demetree’s loan could be converted into equity. Others had invested in return for shares. Having started off as sole shareholders in 2010, by the time they went into liquidation Natasha Rufus Isaacs and Lavinia Brennan owned just 33 per cent of Beulah between them.

The non-executive directors claim the women had not paid any money into their company since its inception. ‘A lot of people on the board were very loyal to the brand,’ says Demetree. ‘But they wanted the founders to put money in, and the founders kept refusing.’

A source close to Beulah says this is untrue — that the women founded the business with their seed capital, took on loans to keep their business going, and that ‘one such loan was lost as part of the liquidation’.

On the surface, neither woman appears to be cash-strapped. Rufus Isaacs, a mother of three, is married to lawyer Rupert Finch (a former boyfriend of the Duchess of Cambridge). Brennan is married to Jamie Richards, a champagne development manager.

For all their privilege there were years of hard graft establishing Beulah. At first they worked out of the basement of Lavinia’s mother’s West London home, with Lavinia taking a job in a nightclub in the early years to make a living. They say it took six years to pay themselves a salary.

But with the patronage of the Duchess of Cambridge, who was pictured in Beulah’s crimson poppy dress in 2011, its profile soared. Actress Sarah Jessica Parker, model Rosie Huntington-Whiteley and singer Katherine Jenkins were also fans.

The high-end online boutique matchesfashion.com became a stockist and they launched into bridalwear.

‘It’s lovely to see celebrities in our clothes. When Holly Willoughby wore our shirt-dress on Instagram, it crashed the website,’ Lavinia once said. ‘But if I’m on the train and see someone with one of our scarves, that’s just as exciting.’

The problem was that, although Beulah was apparently reporting triple-digit growth year on year, the company struggled to make a profit. According to Lou Ellerton, director of market research agency Kantar, in Beulah’s mid-luxury market sector it is difficult to translate celebrity endorsement into sales.

In 2018 Beulah made a £1.7 million loss. Little wonder, perhaps, its founders were looking for funds by the time they called Demetree, who agreed her £400,000 loan. But the relationship quickly turned sour early this year when Beulah were unable to afford Demetree’s interest repayments.

The two sides’ accounts of what happened next vary. A Beulah source says that, knowing there was a payment due and that Covid was about to hit, the founders ‘tried to open up a discussion’ and ask for forbearance [postponement] on payments. They claim instead of negotiating, or converting her loan into equity, Demetree insisted on the return of her loan, plus four years of interest repayments totalling £163,000.

With the patronage of the Duchess of Cambridge, who was pictured in Beulah¿s crimson poppy dress in 2011, its profile soared. Actress Sarah Jessica Parker, model Rosie Huntington-Whiteley and singer Katherine Jenkins (pictured) were also fans

With the patronage of the Duchess of Cambridge, who was pictured in Beulah’s crimson poppy dress in 2011, its profile soared. Actress Sarah Jessica Parker, model Rosie Huntington-Whiteley and singer Katherine Jenkins (pictured) were also fans

For her part, Demetree — who had agreed 12 per cent annual interest — insists she was willing to renegotiate the terms of her loan, as does Niall Brennan, who called Demetree to discuss the terms of her loan.

In March, Beulah’s Belgravia store temporarily closed — leaving Grosvenor Group, owned by the Duke of Westminster’s family, owed more than £25,000 in rent. Last week, they declined to tell the Mail whether they had been paid.

By April, the founders were reported to be approaching insolvency practitioners.

Demetree believes every effort was made by Beulah’s board to make the business viable before it went into liquidation. Niall Brennan says the non-executive directors offered to put up the money to save Beulah ‘either by raising finance or backstopping it ourselves’.

But it was decided the plans were not viable. In May, after Demetree had resigned, the board — all of whom, apart from Rufus Isaacs and Brennan, worked abroad and so were not in a position to run the business — voted to allow Beulah to go into voluntary liquidation.

Demetree found out about the liquidation via a call from the board. ‘I was overwhelmed,’ she says. Bids for the sale of Beulah’s stock, trading name, website and social media accounts were taken by advisory firm Quantuma. The winning bid was made by company Lado Sarai, which had been created in June and of which Rufus Isaacs and Brennan are sole directors and shareholders.

Belgian shareholder Frederic Hufkens gave them the financial backing to buy back their business. The Beulah source says ‘the actual agreement was only made a day or so prior to the offer going in’.

An investor in Beulah prior to liquidation, Hufkens is expected to be given a third of the shares of the reinvented Beulah, leaving the women in control.

‘Now they’ve got back in control, they’re in a much better position,’ says Demetree.

Beulah insists it wasn’t an intentional strategy. ‘In the end, there was no way out,’ says a source. ‘They didn’t really have any choice.’

While what they paid for the business will be put towards settling debts, those owed money are likely to receive only a fraction back. Having hired legal representation Demetree is ‘contesting everything’. She adds: ‘We’ve lost all our money and they’ve gone right back online as Beulah. How is that fair?’

Last night a spokesperson for Beulah said: ‘We are deeply sorry for any distress the last few months may have caused some of our partners. Our decision to start again, under this new structure, is an attempt to set this right, and to go back to the path of being a successful and purpose-driven brand.

‘As with nearly every business in the luxury goods industry, Covid-19 has had a devastating impact on Beulah. We had already embarked on a new fundraising round at the start of the year when Covid struck.

‘As a young company, and one that sells occasional wear, particularly between the months of April and June, we were forced to close our shop, as per government guidelines, and to put the business into hibernation after seeing revenue drop significantly overnight.

‘At the same time, Beulah was issued a default notice by London Entrée [Demetree’s company] on a convertible loan note which was taken on board by the company last year.

‘After months of negotiations to try and find a solvent solution, the board of directors were left with no choice but to enter into insolvency.’

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