The Cambridge Analytica insolvency announcement is unlikely to have come as much of a surprise.
However, the events that led up to this point and potential future ramifications comprise an interesting case study.
Here, we'll discuss the latest announcements and what they might mean going forward.
Who is Cambridge Analytica?
Cambridge Analytica was the firm at the heart of the recent scandal surrounding the gathering and sharing of Facebook data.
The company purchased the data of 87m Facebook users from the creator of an app named 'This Is Your Digital Life'.
The app stated it gathered user information within its labyrinthine T&Cs. However, it also collected data on users' Facebook 'friends' without permission and used this information for purposes beyond which it was initially intended.
As a political consulting firm, this data was subsequently leveraged as a campaigning tool in the run-up to the EU referendum and most recent US election.
Why have company bosses commenced Cambridge Analytica insolvency proceedings?
In most cases, creditors are the party to appoint an administrator. However, the situation is somewhat different with Cambridge Analytica.
Though the company denies any legal wrongdoing, the weight of negative PR that Cambridge Analytica has endured since the scandal first broke has made normal trading impossible.
Company bosses state the business is now in a "precarious financial condition". However, the company is not currently known to hold significant debts, which is often the case when insolvency is concerned.
Due to these factors, the directors of Cambridge Analytica's parent company SCL Elections Ltd. filed insolvency proceedings for the company on 2 May. Vince Green and Mark Newman, partners at Crowe Clark Whitehill, have been appointed as joint administrators.
What will happen now?
The Cambridge Analytica insolvency looks set to progress relatively smoothly.
A statement from the company has pledged it will “fully meet its obligations to its employees, including with respect to notice periods, severance terms, and redundancy entitlements” (Accountancy Age).
However, the company is also subject to investigations by the Electoral Commission and Information Commissioner's Office in the UK, as well as Robert Mueller in the US (The Guardian).
The liquidator also has broad investigatory powers. Yet, it is only likely to look into the conduct of directors with regards to responsible spending and creditor treatment.
Though the liquidator can't investigate the supposed privacy breach, it can access bank account details and other similar records. As part of this process, the liquidator may uncover connections that could prove useful during the aforementioned investigations.
The Cambridge Analytica insolvency case is far from typical. However, there are lessons there for business owners from a range of industries. This story is sure to develop further, so stay posted.
If you are concerned about the prospect of insolvency, contact our team of Company Rescue experts today.