The owner of Patisserie Valerie has said its finance director Chris Marsh was arrested last night and then released on bail.
The cafe chain is fighting for survival after revealing on Wednesday it had uncovered “significant, and potentially fraudulent, accounting irregularities”.
Mr Marsh had been suspended when these problems were discovered.
On Thursday, the firm said it needed “an immediate injection of capital” to continue trading in its current form.
The company, in which entrepreneur Luke Johnson has a 37% stake, did not provide any details of its fund-raising effort in its latest statement.
In a brief announcement to the stock market, Patisserie Holdings – the owner of the cafe chain – said: “The company has been made aware that Chris Marsh, who is currently suspended from his role as company finance director, was arrested by the police last night and has been released on bail. Further updates will be released in due course as appropriate”.
Hertfordshire Police said: “A 44-year old man from St Albans has been arrested on suspicion of fraud by false representation. He has been released under investigation.”
Shares in Patisserie Holdings were suspended on Wednesday.
In its most recent results statement in May, the firm said it had cash reserves of £28.8m.
But the company said on Thursday it had found “a material shortfall between the reported financial status and the current financial status of the business”.
It also said that the board had been become aware this week of a winding-up petition against its principal subsidiary Stonebeach, from HMRC over £1.14m of tax.
Speaking on the BBC’s Today programme. Julie Palmer of restructuring experts Begbies Traynor said that “normally” after a winding-up petition “banks will freeze company bank accounts which makes day-to-day trading very difficult”. The company did not comment on this.
The business was listed on the stock market in 2014 when its shares were floated at 170p a share. They were trading at 429p before its shares were suspended, valuing the business at £440m.
The first Patisserie Valerie store was opened in the Soho district of London in 1926 by a Belgian woman, Madame Valerie. It is now part of a chain with 206 stores and employs more than 2,000 people.