Photo Credit: Sarah Agnew

Flaunt Weeekly Proper Group AG, formerly known as Utopia Music, has been put into bankruptcy by Swiss courts. After alleging the move was a misunderstanding last week, more light shed on the situation highlights unpaid employees and mountains of debt.

Last week Digital Music News reported on Proper’s response to the Swiss bankruptcycalling it small issue due to ‘minor debt.’ But Complete Music Update’s Sam Taylor”https://completemusicupdate.com/proper-group-ag-the-company-formerly-known-as-utopia-is-riddled-with-debt-and-has-left-its-few-remaining-staff-high-and-dry-with-salaries-unpaid-for-months/” data-wpel-link=”external” rel=”nofollow external noopener noreferrer”>spoke with John Mitchella key investor and former board chair for Proper Group AG. So far, the company has missed €474,090 ($518,867) in salary payments to staff, plus taxes, social security, and pension commitments.

As of September 2024, Proper Group had €30M ($32.8M) in debts, reduced from the €56.275 ($61.5M) million debt reported in August 2023. Proper Group AG says that €18.29 ($20M) million of the debt is in conversions to equity, which the company says are not true liabilities on its books. Proper Group AG has raised around ~€15 ($16.41M) million in cash since December 2023, with an additional €6.64 ($7.27M) million in escrow.

Because of its cash flow issues, around 25 staff employed by Proper Group’s Swiss entity have not received salaries since July. Missed payments for August and September mean none of these employees have jobs “by definition and at law” as of today. If the insolvency appeal is successful, staff may receive their owed salaries, but further redundancies are planned. In speaking with CMUMitchell says he doesn’t have confidence that the bankruptcy appeal will be successful.

“I’m as confident as I can be in a 200 page document that a small group of executives worked tirelessly on for ten days. I’m confident that, if I was looking at it in isolation, I’d lift it—because we have raised a significant amount of money on escrow for exactly this purpose,” Mitchell told CMU.

If the bankruptcy appeal is successful, the company plans to move to a debt moratorium/Chapter 11 proceeding to further protect the company. Unsecured creditors, including former owners of Lyric Financialmay not receive the full amount they’re owed. Lyric Financial recently won a debt judgment in New York for over $1.8 million as the final payment for the acquisition of the company that was not made.

Proper Group AG has been unable to access the proceeds from the divestment of Sentric Musicwhich will remain locked in escrow until 2025-2027,” with the funds release being “subject to performance criteria,” Mitchell says. Utopia Accelerate UK Limited, established as a subsidiary in 2022, could be subject to liquidation in the ongoing debt dispute. The UK subsidiary was left without a director for months, though Mitchell says the employee is back on board “with an assignment for the sole purpose to ensure the liquidation procedure for [Utopia Accelerate UK Limited] could proceed with all haste.”