Hove MP Peter Kyle has called for Parliament to investigate the problems at Patisserie Valerie, the cake shop chain with branches in Brighton and Hove.
A £40 million black hole has been found in the company’s finances, trading in its shares have been suspended and its finance director Chris Marsh has been arrested.
Executive chairman and main shareholder Luke Johnson, who also owns the Palace Pier, called in the police. And the Serious Fraud Office has begun an investigation.
The company has sacked its auditors Grant Thornton and, according to reports, may sue the firm for failing to spot the problem.
Despite such swift action, saving 2,800 jobs and more than 200 cafés, and although Mr Johnson put in £20 million and the company raised £15 million from an emergency share issue to keep the business from collapsing, Mr Kyle believes that a parliamentary inquiry is needed.
The Labour MP, a member of the House of Commons Business, Energy and Industrial Strategy Select Committee, wants to know why the warning signs of financial problems were not spotted sooner.
According to the Daily Mail, he said: “Patisserie Valerie’s situation only exemplifies the need for a wholesale look at how we ensure our companies get the right governance and the right external scrutiny, so that shareholders, customers and our broader economy can be reassured that best practice is being followed.
“We have mostly focused on the big firms so far, such as Carillion and the like, but Patisserie Valerie shows it is not just a problem that exists at big companies.”
The sale of another business backed by Luke Johnson had been delayed. Gail’s bakery, which has a branch in Church Road, Hove, at the bottom of George Street, was expected to be auctioned in the coming months.
Mr Johnson is reported to want to wait until after Brexit next March to sell Gail’s Artisan Bakery.
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