This is a special report by music industry journalist and author Eamonn Forde.
More than 30 former staff members at Utopia UK (R&D) Limited – the UK operation of Utopia Music – appear to have been left in financial “double limbo” due to its liquidation not yet being fully completed.
They have not received their full severance pay and they are currently unable to access a government pot of money to aid employees when a company is insolvent or even apply for Universal Credit to get financial support from the UK government.
Music Ally has spoken to multiple former Utopia UK (R&D) employees, across numerous departments, about the extreme “emotional toll” this is causing them.
The UK arm of the company had a round of redundancies at the end of 2022, but a further round of redundancies was announced on 26 May.
For most staff in that particular round of redundancies a three-month garden period applies, meaning the effective termination date for their employment is 26 August. (We understand that some senior executives have a longer garden leave period in their contracts.)
This money – a mix of July salaries, garden-leave pay and accrued holiday pay – is still outstanding.
“The vast majority of people haven’t been in the company for more than two years, so they aren’t entitled to any redundancy pay,” said one source. “But almost everyone’s on three-months contractual notice and any approved holidays that would have built up. Obviously garden leave means that you’re still an employee.”
An estimated 17 staff members were on garden leave from 26 May, but there were others in the UK who had not been made redundant and so continued working for the company.
A third category of employees includes those not on garden leave and no longer working for Utopia, but who still have not been fully paid out as per their termination agreements.
We understand there may be a fourth category of UK staffers who were individually verbally offered possible consultancy roles elsewhere in the company.
A source added, “Some employees were arbitrarily denied pro-rata vesting of stock options, that they were clearly entitled to, with no reason given.”
Music Ally spoke to Utopia about this and a company spokesperson said that they “unfortunately have to wind down the Utopia UK (R&D) Ltd entity in order to safeguard the rest of the business”, adding that the company is currently going through creditors voluntary liquidation.
They said this means that “all payments from the affected entity – including to staff and garden leavers – are frozen pending the liquidation process”.
Closing down the UK operation: salaries and holiday pay remain outstanding
On 21 July, the remaining UK staff members under employment were told to join a call where it was announced that Utopia UK (R&D) Limited was being shut down with immediate effect.
According to documents seen by Music Ally, insolvency practitioners AABRS Limited had been instructed by Utopia on 9 June following a board meeting, so this was several weeks before the date (21 July) when operations at the UK division formally ceased.
Alongside AABRS, Utopia says that it has appointed ERA Solutions Ltd to “answer questions from those affected”.
As it stands, former UK staff members “will be able to make claims only once the filing of the liquidation request has been made”, according to Utopia. It added that the UK’s National Insurance Fund, in collaboration with HMRC, will be in charge of handling the actual payments.
“Our commitment remains steadfast in ensuring that all aspects are handled with utmost care and diligence,” is how Utopia put it when asked about how the process will play out.
All affected staff members say that July payslips were issued but no money landed in their account. Utopia put this down to an administration problem.
“Utopia made it clear in the announcement call with the affected former employees that the July salaries will not be covered by Utopia,” the company said.
“This was also reiterated in the initial call between ERA Solutions and the affected former employees; that July salaries can be claimed as part of the regulated process. Then there was indeed unfortunately a mistake made in accounting regarding the July salary payment slips that were wrongfully sent out.”
A source claimed that Utopia has reported this money to HMRC as already having been paid to employees. Their concern is that a liquidator may be under the impression that staff have been paid for July when in fact they have not.
Utopia responded: “As soon as this mistake was identified, we immediately addressed the problem and informed HMRC to rectify this, which was done in under a day. We sincerely apologise if this led to confusion or if it causes any delays.”
This echoes disruption to payroll at the company when multiple salary payments from December 2022 through to April 2023 were delayed with barely any forewarning. A source said in one instance that they were only alerted on payday itself that their salary would not arrive that day.
On top of this, employees that Music Ally spoke to said that they have not been paid their outstanding holiday pay.
“Many employees who were already on garden leave before the liquidation are also owed an additional 16 days’ pay promised in lieu of their mandatory individual consultation period,” said one of those affected. “Additional payments outstanding in some cases amount to as much as an additional 6-8 weeks’ equivalent pay.”
When asked about this, Utopia reiterated its point that all payments – including holidays payments – will remain frozen until the liquidation process has been completed. “These processes can be confusing and take a lot of time.”
Ongoing, rather than complete, liquidation leaves former employees in limbo
Because the company has not formally completed liquidation, affected staff members do not have the requisite case numbers that would allow them to apply to the dedicated government fund for financial support in such cases.
“No liquidation has been registered with the appropriate government body, the company still exists, and we are still going on our garden leave legally,” said one source. “There’s no liquidation that has occurred yet.”
They added that trying to get clarity on the matter, or if/when it will be resolved, was proving to be difficult.
“It is radio silence for me completely,” said one affected individual. “I’ve had no responses whatsoever since 21 July. Since then, the liquidator company and the solutions company that have been brought in have just not responded to anybody, as far as I can tell. They haven’t responded to me at all.”
The former staff members are also worried about their National Insurance payments and, if they have not been made or fallen into arrears, how this might affect their state pension.
Utopia responded: “ERA Solutions has made it clear to us that the National Insurance contributions and state pensions of former Utopia UK (R&D) Ltd employees will not be affected by any debts owed to HMRC by the Utopia (R&D) UK entity.”
Utopia insisted that there “has not been a delay” is bringing liquidation of Utopia UK (R&D) Limited to completion, saying this is a “formal process that has to be overseen by a licensed insolvency practitioner before being agreed to by the creditors, and takes a few weeks”.
Former staff members take issue with the phrase “a few weeks” as it has now been over a month since the UK arm was shut down and they still have no confirmed timeline for when the process could be completed.
Utopia said that “creditors are analysing the documents prepared” and once that is approved, the petition will then be filed.
“We recognise the frustration from the affected former Utopia UK (R&D) Ltd employees but, unfortunately, we cannot change the regulated process.”
The list of creditors
A document entitled “Statement of Affairs”, dated 15 August but written on 14 August, was circulated to affected staff members. 14 August is referred to as “being a date not more than 14 days before the date of the resolution for winding up”.
A copy of the full document was passed onto Music Ally, which also understands that process will begin on 22 August.
In the document, Utopia lists all the Company Creditors and what they are owed. Notable among these creditors is Utopia Music AG, the company’s headquarters in Switzerland. It is owed £1,895,727.97 (around $2.4m at current exchange rates).
Another major creditor is MPL Communications Limited, the company owned by Paul McCartney. The sum of £250,615.70 (around $318.7k) which Music Ally understands is back rent for the UK offices of Utopia, is owed to MPL as landlord.
The single largest outstanding sum, however, is due to HM Revenue & Customs. It is owed £2.5m (around $3.2m).
Under the title of “Company Creditors – Employees & Directors”, monies owed are split into two parts. There is £167,634.30 listed under “preferred creditors” and £994,535.82 listed under “unsecured creditors”, bringing the total to £1,162,170.12 (around $1.5m).
In insolvency proceedings, “preferred creditors” are given priority over “unsecured creditors” when and if any remaining monies are distributed.
Affected staff members are concerned that the £167,634.30 falling under “preferred creditors” may only amount to a quarter of what they are actually owed as per their garden leave terms.
Music Ally asked Utopia directly about this issue of only a fraction of due salaries potentially coming to former staffers.
“Here we must also refer to the regulated process,” it said. “Each former employee will be supported by ERA Solutions in claiming the entitlements that they are due.” It would not comment on the significant shortfall here as claimed by ex-employees.
Missing pension payments
For staff members who are pregnant, huge anxiety and uncertainty surround the implications for their maternity pay.
Former staff members are also gravely concerned about due pension payments, with Nest being Utopia’s preferred pension company in the UK. They say that 5% of their salaries were typically put into Nest pensions and Utopia matched that sum.
Some former staff members, however, used their own private pension firms where a similar 5% / 5% payment was set up.
Several individuals who spoke to Music Ally say that 5% of their salaries for certain months were deducted but have not yet appeared in their Nest or private pension accounts.
“Deductions were made from my salary, from my personal contribution to my pension, but they do not yet appear to be in my pension fund,” said one former employee of what happened with their most recent payslips from Utopia.
This was previously an issue at the company in late 2022 and early 2023.
“From October to February, we didn’t receive any pension payment into our pension pot, despite our own contribution, the employee contribution, being taken from our salary,” said a source. “Our pay slip clearly detailed gross salary minus tax et cetera.”
In the UK, employees can report their employer to the Pensions Regulator for non-payment of agreed pension contributions or if due payments are over 90 days late.
“Communication from finance on what money was available, and what was going to get paid, was guesswork,” they claimed.
“It was very difficult to manage. In March, a flurry of money came as a consequence of selling Sentric [to Believe]. Then they made up all of the pension arrears and had just about paid the arrears within the three-month window. But then they fell behind again.”
A further source said they remain bamboozled by these sporadic payments as they do not have full clarity on what is or is not currently owed on their pension.
Speaking in mid August, they said, “I’ve tallied all of mine and they’re still behind on July. It’s extremely sporadic. Almost to the point where it’s impossible to calculate that they’ve done it correctly. Once they get to the very last knockings, it’s calculated that they then parachute some cash in to keep the wolf from the door.”
Utopia responded by saying that, during its transition period, it has “encountered some challenges, leading to occasional delays in payments”. It added that it has now “identified the affected areas” and will be “implementing processes to resolve past issues” with regard to pension payment problems.
“ERA Solutions will be instructed by AABRS to recover pension contributions deducted from the salaries of affected staff and make payments directly into their pension plans,” it told Music Ally. “This will include the 5% employer contribution.”
Regarding the pension payment issues in late 2022 and early 2023, Utopia claimed that by “growing very fast” it was “undergoing a comprehensive transformation process”.
It listed a multitude of factors (“streamlining operations, consolidating entities, and optimising processes”) that resulted in “right-sizing of our overall workforce to match our service offering and making our business sustainable”.
It admitted that, on what it termed “a few occasions”, payments were delayed because “certain processes were not working correctly”, although it did not clarify what those “certain processes” were. It claimed that the company “upgraded our internal processes to “identify and address all payment-related issues”.
Caught in limbo while waiting for further developments
The non-payment of salaries during garden leave, the fact “preferred creditor” payments on these salaries is actually a quarter of what is believed to be owed, the confusion around pension payments, and the non-communication from senior management all mean a large number of former employees are caught in a cruel limbo.
Music Ally asked Utopia if UK staff would get a full apology for what they regard as the egregious way in which they have been treated, and continue to be treated, through this period.
“Any decision affecting our people is not taken lightly,” said the company spokesperson. “We sympathise with all involved former staff and sincerely apologise if there are delays that could have been avoided.”
It added, “As a company, we have successfully transitioned to a much leaner and revenue-focused business, focusing on fewer, top-of-the-shelf, products and services that are much sought-after by the music industry. We are now in a position to become profitable with a more sustainable cost/income ratio and attainable growth targets. In addition, we have re-shaped our corporate services team. They have upgraded our internal processes to identify and address all payment-related issues to ensure they are rectified and don’t happen again.”
In desperation, several ex-employees attempted to claim Universal Credit in mid August have been told they cannot as there is an impression they were all paid for July (as pay slips were issued but no payments were made to staff).
As one source puts it, “We’re all in no man’s land.”
For a company whose slogan has long been “fair pay for every play” – referring to musicians – this state of affairs for its former employees is far from ideal.
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