Coventry City of Culture trust 'unlikely' to pay back over £4 million to creditors

The Coventry City of Culture Trust charity is 'unlikely' to be able to pay back over £4 million to its creditors, according to a report.

The city was awarded the title back in December 2017, but celebrations were delayed due to the Covid-19 pandemic.

More than million people are thought to have attended 700 events, both online and in person throughout the year with faith groups, community centres, libraries, schools, community radio stations, the police, and local arts organisations making it possible.

Despite its success, the charity set up to run Coventry's City of Culture year is estimated to only be able to repay debts to former employees and part of what it owes to HMRC.

Groups, including Coventry City Council and Assembly Festival Group, which are waiting to be paid more than £1 million won't receive a penny until the Trust recovers more assets and no other creditors come forward.

A notice of proposals was sent out last week (April 25) in which administrators stated they believe creditors will unlikely receive any money at this stage.

Former employees of the Trust and the costs of administration will be paid first, leaving less than £100,000 to be distributed out to creditors.

The report states over 35 creditors who are 'unsecured' will receive nothing.

West Midlands Police are listed as being owed £500,000 and are likely not to get the costs for policing the event paid back.

Other Coventry groups listed as being owed five figure sums including Culture Coventry, The Albany Theatre and Coventry University.

The level of deficit to creditors, including over £30,000 owed to HMRC, will total just under £4.25 million.

The trust went into administration in February, meaning all legacy projects planned to build on Coventry's year as City of Culture in 2021 could not be delivered.

The report states, Covid-19 not only delayed the City of Culture year's start date, it also "adversely impacted the Company's business activities."

Extra safety measures had to be put in place and fewer people were able tot turn up due to restrictions and people not wanting to go to big gatherings.

"The above challenges meant that events hosted by the Company accumulated liabilities throughout the year of delivery," the report says.

Artistic Director of Assembly Festival, William Burdett-Coutts, who is waiting to paid back said it is "not a surprise" they might not receive a penny.

A spokesperson for Coventry City Council said: "Although it is still uncertain how much, if any, money we will receive once the administration process has finished, the council will do all we can to ensure it is as much as possible."

West Midlands Police, said it "expected to receive an additional donation of £505,102 from the trust.

"As a publicly funded body, our position is that we should be at the top of the list of organisations to receive any money raised from the trust's assets by administrator.

"We are working closely with the trust's administrators and continue to push for any money we are owed as part of this well-established legal process. We will explore all options available to us."

How did the Trust get here?

Due to the increase in costs the Trust set up the Reel Store in may last year and ran the popular Assembly Festival Gardens for a second time in an attempt to earn more money to pay contributors.

In October 2022, the Trust asked for a £1 million loan from the council to help with "what was felt to be a short term cash flow problem."

The report says the purpose of the loan "was to enable the Company to pay its creditors, continue to develop The Reel Store and to deliver the agreed legacy programme which had confirmed funding from the Government via the DCMS amongst other grant providers."

However, despite the additional income more funding was needed to help the Trust from entering an "untenable" financial state.

The Trust entered joint administrators at the end of January, but still tried to avoid a formal insolvency process.

On February 13 the Trust's Board stated " it was extremely unlikely that the Company would be able to return to a solvent trading position."

But the charity stayed operating until the end of February so it could finish the Reel Store's Frida Khalo exhibition and pay employees for the month.

Creditors will continue to look at how the Trust used public money through electronic records for the charity.

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