Sales were seasonal and the volume of sales had been affected by wet summers and mild winters which meant sales were slow. The company struggled with cash flow problems and a build-up of credit plus a material debt to the bank who held a debenture that the director had guaranteed.
Following a detailed review, it was clear that the company had invested considerable effort into e-commerce sites which definitely had a value. But sales were based on taking deposits for the supply of units and as stock was unpaid and subject to retention of title claims, trading o these sites had to be suspended whilst the business was marketed for sale.
This resulted in numerous expressions of interest and a number of offers. As a result the business and assets of the company were sold, out of Administration, to an unconnected third party for an amount of £220,000. This offer comprised of £85,486 in relation to Goodwill and IPR and full market value for the plant, machinery and residual stock.
APPROVED ADMINISTRATION SOLUTION
The business was preserved and sufficient realisations were generated to ensure that the company’s bankers (who held a fixed and floating charge) received repayment in full. Following completion of the sale and other matters to be dealt with in the administration, the company entered Liquidation to allow unsecured creditors’ to receive a distribution which is anticipated to be much 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.