In our piece on the most recent Chapter 11 bankruptcy of Tori Belle Cosmetics, I neglected to include the corporate response and what the bankruptcy implies for affiliates.
Given that the bankruptcy is still in its early stages, there isn’t anything in the court docket as of yet addressing this.
Strangely enough, Tori Belle Cosmetics didn’t address the bankruptcy until Friday, August 19th, if you search for a statement outside of filed court filings.
Nineteen complete days have passed since the bankruptcy petition was submitted.
As I type this, there are no results for “bankruptcy” on the Tori Belle Cosmetics website.
On August 10, two days after declaring bankruptcy, Tori Belle Cosmetics corporate was celebrating in Punta Cana with affiliates, according to the company’s official Facebook page.
There won’t be anything pertinent after that until CEO Laura Hunter’s unscheduled afternoon broadcast on August 19.
Therefore, there was some drama this morning. The term “bankruptcy” could have appeared when some of you woke up. And it’s a very spooky workout.
Furthermore, we wanted to reassure you that Tori Belle is a successful business and would not go out of business or shut its doors.
This process is known as Section 5 Restructuring of Debt.
Hunter is referring to Section 5 of the Bankruptcy Code for Chapter 11;
Businesses can restructure and reorganize their debt over three and five years while still operating under Chapter 11 bankruptcy. But for many small business owners, a Chapter 11 petition is frequently too complicated and expensive.
2019 saw the addition of Subchapter 5 to Chapter 11 of the U.S. Bankruptcy Code, facilitating the filing of reorganization bankruptcy cases by small enterprises.
In 2020, the subchapter became effective. It provides a streamlined method for paying off debt for small firms that are making a profit but are having problems meeting their commitments.
An “automatic stay” that “prevents creditors from pursuing collection efforts and will halt most court actions against you” is a result of this.
Hunter keeps going;
And the reason we’re doing that is that during COVID, not only because of the ups and downs of COVID but also because we had to quickly replace all the damaged lashes, we accumulated certain debts that were substantial and became due all at once.
And even though our business is successful, it was quite challenging for us to have a solid runway. And to continue developing into a good, robust business.
In light of this, we chose to restructure those loans. That’s what we’re doing right now.
Tori Belle Cosmetics “is going to be okay,” Hunter tells affiliates, adding that “we had a little question about how this worked.”
Bob and I were both perplexed since you need a judge’s approval to accomplish this, which is why I was. Because the judge must affirm that you are a successful business. You do have assets. Yes, we will carry out your request.
And I thought that’s when it (the bankruptcy) was filed, just after that incident.
It seems I was mistaken. That exchange took place this morning. So, assuming it was accepted, I assumed it would be filed on Monday.
I didn’t realize that by pre-filing it, you may schedule a meeting with the judge. Following your meeting with the Judge, you carry out the remainder of the plan.
I thus believed that this was truly occurring on Monday. And based on their initial filing to schedule the Judge’s appointment, it appears to have occurred around a week and a half ago.
As a result, we couldn’t understand how this could be occurring.
Because bankruptcy processes are complicated, I’m willing to give Hunter the benefit of the doubt in this case. I’ll also correct her, though.
On August 19, Tori Belle Cosmetics’ ex parte application to pay employee wages and salaries was the only matter before the court.
Since the application was approved, Tori Belle Cosmetics employees will likely start receiving their paychecks early next week (if they haven’t already).
Contrary to what Hunter said, the judge did not approve the reorganization of Tori Belle Cosmetics during that hearing. I’m a little shocked that the business hadn’t fixed this as of publishing.
I also don’t get Hunter’s allegation that she and Bob Kitzberger were taken by surprise at the hearing on Friday. Not only did Kitzberger approve the Chapter 11 bankruptcy on August 3rd, but Tori Belle Cosmetics also submitted the application that sparked the hearing:
As stated before, this occurred during a “special meeting” of the board of directors of LashLiner on August 2nd to discuss the bankruptcy.
The parent company of Tori Belle and Cosmetics is LashLiner. I’m going to take a wild guess and say that Kitzberger and Hunter both serve on the board of directors for LashLiner.
Hunter continues by saying that Tori Belle Cosmetics “may become better” as a result of the bankruptcy.
This is only another stage in our development. And when it comes to the more concrete business meaning, it’s a terrifying phrase that many people find difficult to comprehend.
I’m sorry that you two were alarmed. This morning, I was also alarmed. I’m very sorry about that. But everything we do is geared toward improving how you run your own business.
According to Hunter, Tori Belle Cosmetics is “going to a larger warehousing location, where we can have… simply better everything,” in line with the company’s reported expansion.
As a final statement, Hunter characterizes the bankruptcy as “not a big issue.” She claims that absent “the drama” on Friday, she had intended to notify the affiliates of Tori Belle Cosmetics about the bankruptcy on Monday.
We now have room to expand during the ensuing years.
We’re introducing additional improvements for the future. Without any restrictions, we’re going forward.
Please ask any queries you may have. And everything is in order. I’m just so sorry that things got mixed up this morning; this is just a standard business process.
In a previous piece, BehindMLM discussed the Chapter 11 bankruptcy of Tori Belle Cosmetics.
There are also two class action lawsuits against the corporation that were both filed in August 2022.
Update: August 22, 2022. The Punta Cana trip optics have been clarified by Laura Hunter, who has contacted me.
We paid for last year’s incentive trip for our affiliates, which we then took them on. It wasn’t refundable either. I’m convinced that we would have faced accusations of wrongdoing if we hadn’t taken them.
But I can’t think of any reason we wouldn’t accept them. Restructuring does not prevent us from appreciating the time we spend with our sales team, who earned their well-earned break.
I tend to concur that there is no “win” scenario in this case. However, such is the reality of a struggling company seeking to reorganize.
The underlying assumption that, if we restructure debt for the sake of the business, we should stay at home and refrain from any form of fun doesn’t make any sense to me.
Debt restructuring is not an improper action. It is a typical instrument for business. It does not imply that we are ceasing operations. Contrarily, it signifies that after a particularly difficult period, we are preserving our capacity to expand and do business.
Financial issues didn’t arise for Tori Belle on August 2; rather, they developed throughout fiscal year 21.
I see two choices given that the Punta Cana trip was previously scheduled and paid for as follows:
Inform the affiliate base that the business was having financial issues before declaring bankruptcy; alternatively, declare bankruptcy, have it leak a few weeks later, and then engage in damage control (essentially what happened).
Option one would have been the least disruptive if properly managed. I see how making the bankruptcy public right before the trip to Punta Cana would have undoubtedly diminished its excitement.
The statement should have been made then, and the business should have filed for bankruptcy right then.
Even while it has its optics, affiliates aren’t left with the impression that decisions that might have a significant influence on their business were made without their knowledge.
Naturally, I’m bringing this up in retrospect and from the viewpoint of affiliates. From a procedural perspective, Tori Belle’s bankruptcy and the restructuring procedure have the same result.
Update #2: On August 22, 2022, BehindMLM released stories on both Tori Belle class-action lawsuits that had been filed.
On August 2nd, the Superior Court of Washington received the initial class-action lawsuit filing. On August 16th, a second class action lawsuit was filed.
The $9 monthly associate membership charge for Tori Belle is the subject of both claims.