In today's email, we've got:

• a sleep wellness company that's not doing so well

• equality for legal apprentices

• law firms in the metaverse

EDITOR'S RAMBLE 🗣

Hey LittleLaw squad!

As you know, we've launched the new website. While we plan to migrate some of the best content from our old website to the new one, this process has to be done manually and might take a while.

So, we've set up a kind-of hidden way to access the old site! You can go to old.littlelaw.co.uk to see all our old reports if you want to read them now.

- Idin

FEATURED REPORT 📰

🛏 Eve Sleep is out for the count

Credit: Giphy

What's going on here?

Eve Sleep, a high-tech mattress and sleep wellness company, has called in administrators after it failed to secure a buyer or more funding.

What does this mean?

The company, which operates in the UK, Ireland and France, floated on the stock market in 2017 with a £140m valuation. But now, it’s safe to say that the company is not doing well. Its number of customers has fallen and its costs have risen over the past years. It tried to find a buyer but nothing concrete came from that. It also tried to raise more money from investors but, again, no success. Eve Sleep’s share price has fallen more than 90% this year.

So it has now appointed administrators (who are licensed insolvency practitioners). This is rarely good news and only happens when a company has serious cashflow problems, is insolvent and facing serious threats from creditors!

Why did it fail?

In June, the business warned that it would fall short of its revenue targets for the year following a significant consumer downturn and rising costs that it’s facing. The firm said customers had stopped buying expensive items and homeware goods because of the current pressure on household budgets.

The company’s chief executive, Cheryl Calverley also blamed the wider economy for its downturn. She said “the scale of Eve was simply insufficient to withstand the economic tsunami.” She also said that the business had tried to “restructure and reduce its cost base” but this was too little too late.

How does administration help?

Eve Sleep has entered into a legal process called ‘administration’ (under the Insolvency Act 1986). The aim of administration is to rescue the company so it can survive and continue. Failing that, the task is to salvage the business to the extent possible. The administrators in this case are Matthew Ingram and James Saunders of Kroll Advisory. These guys have been tasked with taking the “necessary step to preserve value for creditors”. Creditors are anyone who the business owes money to, like banks or suppliers who have not been paid yet.

The process of administration puts a freeze on creditors’ abilities to bring actions against the company, giving it some breathing space to figure out the best way forward. The administrators take control of the company away from the company’s directors. What often happens is that they end up selling the company's assets, often as part of a sale of the company's business (if it can be kept alive).

Currently, Eve Sleep’s creditors will be hoping that some money can be raised from this process so they can be repaid. But it’s not looking too great for them. The company has said that the outcome for creditors is unknown.

Shareholders, who get paid after creditors, should also be worried. Eve Sleep said that it “is not expected” there will be “any return to the shareholders of Eve” after hiring the insolvency specialists.

Eve’s shares have now been suspended from the London Stock exchange’s AIM (a sub-market of the London Stock Exchange) as a result of the administration.

What’s a lawyer’s role in an administration?

When a company looks like it's insolvent (meaning it's unable to pay its debts), there’s no one-size-fits-all solution.

Administration is one option. You might choose to liquidate the company - a formal procedure for closing a company, which is often voluntary. Another alternative is a Company Voluntary Arrangement (or CVA) which involves reaching new agreements with your creditors.

Lawyers who are specialists in the field of insolvency can help in a few ways. They can help determine (along with he help of an accountant) whether the company is, in fact, insolvent. This is important to know as if your company is insolvent, you need to start thinking about protecting your creditors to minimise their losses.

If you’re a director of a struggling company, insolvency lawyers will also advise you on the most suitable route to choose from the options above and appoint administrators if needed. Also, if you’re planning on selling the business or getting new investment in, corporate lawyers will be needed to help get that done.

Insolvency lawyers are also instructed by the administrators (who are often accountants) to help them out wherever needed. For example, they might try to renegotiate some of the agreements with creditors and need lawyers with suitable expertise to prepare those agreements.

A BIT OF FUN 😄

Emoji Capital Cities

Credit: Giphy

Commercial law is a global world. So you've got to know your way around a few capital cities!

Try and guess the capital cities that match with each set of emoji clues below.

1. 💹🏠

2. 💥🐓

3. 👻👨‍👦🐁

4. (😈🔥)🚰🔑

Scroll down to the bottom to see the answers. 👀

IN OTHER NEWS 🗞

• ⚖️ Legal apprentices should be treated equal to trainees: 19 City firms have signed a public pledge to ensure legal apprentices are treated equally with employees on training contracts. The pledge has been created by Norton Rose Fulbright to demonstrate that the apprenticeship route is no less valuable that the traditional route to qualification.

• 🖥 The Financial Times has published its special report on law firm innovation: The special report is filled with loads of different articles on cool new stuff lawyers are doing (there's an awesome article on law firms operating in the metaverse).

• 📉 The pound losing value gives US firms the edge on talent: UK law firms, including the Magic Circle, are struggling to attract and retain their lawyers against offers from US competitors. While American firms are known for paying higher salaries, the weak pound and the fact that some US firms peg their staff's pay to the US dollar, have made switching an even more lucrative option.

AROUND THE WEB 🌐

• 👀 Applications: Last week we shared TCLA's application tracker. This week, we want to share their very cool updated application tracker.

• 🐱 Relaxing: If you love cats, this website lets you set cat purr noises to calm you down. Also, if you have a cat, apparently they'll love it!

• 🗞 Useless: New Zealand proposes taxing cow burps to reduce emissions.

Credit: TCLA; r/internetisbeautiful ; r/nottheonion/

Quiz Answer: 

1. Stockholm

2. Bangkok

3. Budapest

4. Helsinki