A Company Director in his 50th year had built
a Company from scratch to an annual turnover of £5-6M. The Company
enjoyed a good reputation for quality and the MD was well known in
his industry and sat on various committees in his professional capacity.They
say bad luck happens in threes.
Firstly, a large contract the Company had been working on went
horribly wrong.
Secondly, a key client that the Company had been dealing with
suddenly went into Liquidation owing them £130K. Realistically
a Nil realisation is expected from that Insolvency.
Thirdly, right out of the blue another large client is disputing
his bill.
In six months the Company has gone from trading comfortably and well,
to having a real Cash Flow shortage of £200-£500K.The Bank - which
only last year confirmed that it wanted to lend more money to the
Company - has gone completely in the other direction and is now talking
of lowering the overdraft limit and requiring more security.The Company
Director borrows £50K from his pension fund and £100K over many months
from his house and Credit Cards to re-invest in the business. He sees
some finance consultants and starts to realise - too late - that he
went to the wrong people. He ages 5 years in 3 months, because he
is not sleeping, and spending his time fire fighting and not running
his business.
The effect
He has managed to keep his suppliers' goodwill
by constantly updating them until, without warning, a Winding Up Petition
is served by a company which is owed only a relatively small amount
- but they are then joined by another Creditor. The petition is advertised
to go to Court in 4 weeks' time. The Bank find out on the Wednesday,
2 days after the Petition is advertised, and immediately appoint Administrative
Receivers under their Debenture. All staff are dismissed on the Thursday
morning apart from 6 skeleton staff.
The result
For the Director:
His Income stream is stopped. No salaries are
paid into his account. This leaves him with personal problems
regarding mortgage, household bills, school fees, and credit cards
(increased by his putting money into the Company).
The Bank calls his personal Guarantee. He has
always assumed that the Bank's Debenture over book debts will
cover the facilities. The Bank advises him of the ruling in 'Brumark'
and advises him that as a result of this they may not be paid
out in full, or at all.
His financial future is totally bleak as there
is no income. Marital problems ensue. (You can deal with many
problems if your income stream is protected, this is our strongest
area. We can protect your income and your future.)
The Company Liquidator asks for all loans
the Director had repaid to himself, family and friends, in respect
of money he had lent to the Company over the last two years, to
be refunded to the Liquidator due to the preference rules.
To avoid the possibility of this happening to
you, please contact us for advice.
What might seem like an impossible situation to
you is an everyday occurrence to us.
What is vitally important to you, the Company
Director, is to get in the driving seat and 'take charge'. If you
do not, then somebody else will.
We can help you deal with your bank / finance
matters, looking at any potential insolvency Issues. There are many
ways to continue trading and re-structure YOUR business. We are
here to help you - the Company Director - we are on YOUR side.
