Simon Lee gallery’s £10m debt revealed in insolvency report

A proposal ready by the insolvency practitioners managing the administration of Simon Lee gallery (SLG) reveals a fuller image of the enterprise’s debt whereas prompting additional questions round its previous dealings. BDO LLP’s 44-page report, issued 5 September 2023 and obtained by The Artwork Newspaper, charts how leverage and altering market circumstances left the long-profitable seller owing an estimated £10m to 153 collectors.

For 17 years from its November 2001 founding, the report finds, SLG posted a internet revenue that remained “largely constant” at between 1% and three% of annual turnover. However after rising to £51.5m in 2018, turnover plummeted in 2019 to only £22.4m, leading to a internet lack of £3.2m. “Shortly thereafter, buying and selling was considerably impacted by the worldwide Covid-19 pandemic”, the report states, prompting SLG to hunt a £1m Coronavirus Enterprise Interruption Mortgage from Barclays financial institution.

SLG then didn’t file its accounts and tax returns “for any interval after the 2019 12 months finish”. This led HMRC, the UK’s tax authority, to petition to wind up the enterprise twice, in February 2020 and July 2022. Each occasions, the gallery reached a settlement settlement, and the petitions had been dismissed.

In February 2023, nevertheless, HMRC issued a 3rd winding-up petition for £1.4m of assessed tax; Barclays froze the gallery’s accounts after the petition turned public in March 2023. Nonetheless, SLG continued buying and selling by way of its Hong Kong department utilizing an account there with Commonplace Chartered Financial institution. A 3rd settlement with HMRC was negated when three of SLG’s collectors, with money owed “totalling in extra of £500,000”, joined the winding up petition, stopping its dismissal.

SLG closed its places in New York and Hong Kong previous to the appointment of the joint directors in July 2023. The gallery’s former Mayfair area, which is leased till August 2025, ceased working final June and is now being rented by Maddox Gallery (which didn’t reply to our questions on its lease phrases). Of the 15 individuals SLG employed earlier than its insolvency, solely three had been saved on by the directors.

A spokesperson for BDO declined to reply questions from The Artwork Newspaper. A spokesperson for Simon Lee additionally declined to touch upon the administration course of.

Money owed and doubts

The report’s most eye-opening part is its try and itemise SLG’s full debt. Among the many 151 listed business collectors are outstanding galleries corresponding to PKM in Seoul (owed £209,351), Mendes Wooden DM (£23,552) and London’s The Artist Room (£15,480). All three of those galleries declined to remark however didn’t deny being owed cash by SLG.

In distinction, though the report lists Hauser & Wirth with an unsecured declare of £3.4m—greater than one-third of SLG’s complete estimated debt—a spokesperson for the mega-gallery emailed The Artwork Newspaper, denying it was owed cash: “Our monetary staff have regarded into it. We now have checked very completely and that is an error of their data. We’re undoubtedly not a creditor.”

(It isn’t unusual for discrepancies, even main ones, to come up because the directors work by way of an bancrupt firm’s monetary data, which are sometimes incomplete, misguided or worse. In such instances, later stories would mirror new info uncovered throughout the course of.)

In the meantime, a lot of artists who’re, or had been till not too long ago, represented by Simon Lee are listed as collectors collectively owed greater than £1m. The Glasgow-based painter France-Lise McGurn has the biggest declare (£631,300), adopted by Jim Shaw (£254,316), Garth Weiser (£210,999) and Angela Bulloch (£145,346). Most artists approached by The Artwork Newspaper stated they didn’t need to converse on report till after the administration course of progresses to settlement agreements.

Though the report parenthetically attributes a £295,278 declare to the Ghanaian artist Serge Attukwei Clottey, finest recognized for his sculptures and installations utilizing yellow plastic containers, Clottey tells The Artwork Newspaper he “has a superb relationship with Simon Lee”. Upon nearer inspection, nevertheless, the precise creditor is Simcor, an entity owned by the outspoken Los Angeles-based artwork seller Stefan Simchowitz.

‘Egregious instance’ of non-payment

Simchowitz tells The Artwork Newspaper SLG in reality owes him much more cash—round $400,000 (£316,000)—for works by Clottey bought on consignment from him. “That is probably the most egregious instance of a gallery not paying me again that I’ve ever recognized,” he says.

Simchowitz claims SLG can be nonetheless in possession of 16 unsold items by Clottey consigned from him and price an estimated $1.8m; as we went to press, he was in talks to retrieve these works by way of Gurr Johns, the artwork appraisal and advisory group chosen by BDO to “assess the inventory of artworks, and to plan a advertising and gross sales technique to ‘maximise realisations for collectors’”, the report states. An additional 4 works consigned by Simchowitz had been nonetheless unaccounted for by the directors, he provides.

The report finds SLG additionally owes substantial sums to a number of different artwork companies, together with virtually £100,000 mixed to Frieze, MCH Group (which runs the Artwork Basel gala’s) and The Armory Present (now owned by Frieze), in addition to no less than £145,000 to artwork shippers and logistics suppliers.

But many of the deepest money owed lie elsewhere. Barclays, SLG’s major financial institution, is owed £736,749. (As a secured creditor, it will likely be repaid in full.) BDO itself accrued virtually £570,000 in administration charges to 4 September 2023.

One other of the heftiest claims within the report belongs to one in all two client collectors, usually people who’ve paid upfront for items not obtained or providers not rendered. The report paperwork a Terry Taylor being owed practically £2.25m.

Hope for reimbursement?

Upon appointment, the directors obtained a debtor ledger from SLG detailing all monies owed to the gallery. The 2 largest entries, for 2 works the gallery claims have been bought however not paid for, quantity to round £7.97m. Though the joint directors caveat that these figures don’t account for what’s owed to the consignors, they pledge to observe up on each transactions, together with an excellent stability of round £393,000 due from a US gallery from the sale of a collectively owned work “roughly three years in the past”.

Till these funds or others materialise, the report estimates simply over £2.9m will probably be obtainable to repay the claims from non-preferential employees and unsecured collectors, who usually obtain—at most—a small fraction of the quantity owed. In SLG’s case, the directors calculate it will depart a shortfall of just about £6.7m.

The report initiatives 10 July 2024 as the top of the administration but additionally states that the winding up course of is “more likely to exceed” this date.