Despite successfully trading since the 1960’s, the company suffered as a result of a global economic downturn. Specifically, the company was negatively impacted by the discovery that a member of staff had stolen significant sums from the business, and as a result of a subsequent shareholder dispute.
Efforts were taken to improve the financial situation including redundancies, setting up a payment plan with HM Revenue and Customs, and plus attempts to secure capital investment. Unfortunately the lack of working capital ultimately led to the decision to consider a pre-packaged administration.
Solution
The company had pre-existing maintenance contracts that were worth preserving but which would give rise to claims against the company if there were not continued. A sale of the business to a connected party appeared sensible as their company was prepared to offer consideration for the assets including the contracts and this would avoid claims.
A senior representative of the purchasing company also provided assistance to the Administrator in collecting book debts due to the insolvent company.
Employees’ contracts of employment were also transferred over to the purchasing company, which provided continuity for staff, and reduced claims in the Administration.
APPROVED ADMINISTRATION SOLUTION
Once all matters within the administration were dealt with, the company entered voluntary liquidation to allow the Liquidator to collect remaining book debts due to the company, and facilitate a dividend return to the unsecured creditors of the company. This return was estimated to be higher than if the company had been wound up (liquidated), without first entering into administration.
Careful consideration must be given to all options available to a financially distressed business. For more advice,
