Company Liquidation

A portfolio with ownership across 11 different entities comprising some 80 units nationwide, with bank debt of £20 million plus. The assets varied widely in quality and value ranging from £90,000 to in excess of £2 million. An initial rent roll of circa £1 million per annum with a large number of vacant units, particularly to the residential parts. There were numerous complex issues including liquidator appointments, landlord compliance matters to residential units, and significant rent arrears.

Work undertaken

Through Eddisons – a Begbies Traynor Group consultancy of chartered surveyors and property management specialists – we assessed the portfolio on a property by property basis and undertook asset management including regularising tenancies and securing deposits. We reduced rent arrears and improved occupancy by securing new lettings and secured lease re-gears to improve investment value. We then implemented a mixed disposal strategy including private treaty, bulk investment and auction sales.

Outcome

This resulted in the bank debt cleared in full and after our initiatives were completed, the rent roll increased by £500,000 and reached £1.5 million per annum.

The Charitable Trust was established by residents to provide a framework through which social, economic, and environmental efforts in the local vicinity could be regularly monitored, reviewed, and improved upon.

It fell under the remit of the Charity to preserve, protect, and enhance local amenities and deliver community transport. The Trust was instrumental in coordinating public transport services on behalf of the elderly and disabled members of the local community.

Following suspicions of the viability of the Charity, an independent charitable review was conducted. It concluded that a string of significant financial reporting errors had occurred as a result of poor bookkeeping practices and accounting incompetence, for which the onus allegedly lied on the in-house bookkeeper.

This resulted in a vote to voluntary liquidate the Charity to immediately protect the interests of creditors and service users.

Work Undertaken

Following a referral from the Charity solicitor, we were appointed as liquidators.

Our team undertook a Creditors’ Voluntary Liquidation and a fundamental aspect of the work undertaken was to ensure service continuity of the charitable service. The CVL procedure was actively structured in a way to minimise disruption to service-users and a cessation in the Charities purpose.

Outcome

The Charity entered a Creditors’ Voluntary Liquidation following an agreement between residents. To ensure transport services would continue for the vulnerable members of society, as championed by the Trust, bus service contracts were transferred to a reputable local bus operator.

The Charity Commission also considered that the charitable purpose could continue under their framework.

The mental health service Charity employed 50 employees with a varied set of qualifications and practical skills in the care and mental health industry. The Charity provided support, advocacy, and advice to individuals of all age groups experiencing mental distress and extended these services to their families and carers. The Charity also provided representation services to mental health service users.

Work Undertaken

The directors attributed the failure of the Charity to a lack of operational leadership, control and financial management.

Two core elements contributed to the collapse of the Charity which were identified as a lack of full cost recovery on the contracts which pushed the Charity out of pocket.

The VAT liability being imposed on the Charity also contributed to the financial distress encountered. The Charity had experienced ongoing technical issues around VAT liabilities, including under-declaration and partial exemption.

Outcome

We provided insolvency advice and undertook the Creditors’ Voluntary Liquidation of the mental health Charity as it was no longer viable and could not be recovered.

Our main focus was on supporting the Charity in conjunction with the service commissioners and local authority social services.

We needed to handle the transfer of the remaining services, including a large number of potentially vulnerable clients, with meticulous care to minimise disruption and ensure service continuity.

The children’s safeguarding Charity provided extensive support to children and young people at risk of, or subject to abuse, neglect, and violence. The Charity supported the mental and physical wellbeing of young people by providing a safe environment managed by highly qualified and knowledgeable welfare workers.

Work Undertaken

The Charity depended on a number of local councils for contracts which contributed to a majority percentage of the workload.

Following a series of funding cuts that took place across local councils, the level of placements on offer to the safeguarding Charity significantly reduced. This resulted in a serious shortfall of contracts and income for the children’s safeguarding Charity.

Outcome

We were appointed as liquidators when the Trustees decided that the Charity was no longer viable due to the financial repercussions that stemmed from the funding cuts that took place at local councils.

While undertaking the voluntary company liquidation procedure and handling two properties owned by the Charity, we experienced a number of complexities.

This included settling outstanding affairs with a secured lender following a substantial shortfall of money. During the liquidation process, we were required to source a suitable buyer to complete the sale of one company. The transfer of another company to another unconnected Charity at the behest of the funder was also executed.

We completed the Creditors’ Voluntary Liquidation and ensured that the essential safeguarding services for young people remained accessible throughout the process.

A group of four manufacturing sector companies presented a particularly complex recent case for Begbies Traynor Group. The group was made up of a dormant company; a company registered in the Isle of Man; a trading company; and a holding company. The trading company had ceased to operate and there was no longer a requirement for any of the companies to remain active. The challenge was to extinguish the various entities and to release the cash in the most efficient manner.

Work Undertaken

After working closely with tax advisers, an MVL was considered the most tax-efficient way of distributing the cash surplus back to the holding company’s shareholders. This allowed for proceeds to be extracted from the company in a cost-effective manner, while also ensuring outstanding creditors were paid in full.

Outcome

All creditors were confirmed through the MVL process and were paid in full.  In total £7.83m was then distributed from the holding company to individual shareholders after all the dividends had been distributed upstream through the group. The company was then able to be formally closed in an orderly manner.

We provided funding support to a business engaged in the manufacture and repair of steel equipment used predominantly in the demolition, quarrying, construction and plant hire sectors. Due to a deteriorating relationship with their bank factor, we were asked to review the business, with the bank suggesting liquidation to be the only solution.

The bank was unwilling to fund certain invoices because the debtor was an agent and the goods supplied were being shipped to the end user in the Middle East. The situation was further complicated as the company also had HMRC arrears of approximately £100k.

Work Undertaken

Our team of specialists met the director of the company who was adamant that the business had a viable future if it was able to find a factoring company that was prepared to spend time understanding the issues the business faced. We introduced an independent factor who replaced the bank’s facility and worked closely with the business to release sufficient funds for the bank to be repaid. 

Outcome

The restriction in funding would have certainly led to the liquidation of the company and subsequent loss of jobs. Due to our understanding of the business and our knowledge of the factoring market, we were able to replace the bank facility and save the company from imminent liquidation. The company continues to trade and the employment of its 8 members of staff was secured as part of the process.

The assets of a 39-year-old family business were bought out of provisional liquidation by a new company, enabling manufacturing to restart with potentially around 30 new jobs. After being placed in liquidation, lack of cash flow made trading impossible with regrettably, no option but for the factory to close and all staff to be made redundant. The team in Scotland generated a welcome level of interest through a targeted marketing campaign, swiftly completing a deal and avoiding major disruption to product supply. This successful outcome saw the factory reopen and new jobs created.

The Company had relationships with some national house builders as well as smaller Companies.  They had experienced cash flow issues due to slow paying debtors and this meant that they had fallen behind significantly with HMRC, the Bank was overdrawn and the Directors had invested some funds.

The Company had work in the pipeline with existing contacts and could be profitable without the historic debt.

We reviewed all of the options available and the Directors felt that the most suitable option was to place the Company into Creditors’ Voluntary Liquidation and buy back the assets and goodwill.

In doing so, the Directors offered to collect the debtors as they had the continuing relationships with the clients which meant that the debtor realisations were maximised. It also meant that the employees all kept their jobs.

The Directors had the support from the Landlord, who agreed to assign the lease to the new Company and also the support from the clients going forward.

A business engaged in the manufacture and repair of steel equipment which are used predominantly in the demolition, quarrying, construction and plant hire sectors. Due to a deteriorating relationship with their bank factor, we were asked to review the business, with the bank suggesting liquidation as the only alternative. The bank was unwilling to fund certain invoices because the debtor was an agent and the goods supplied were being shipped to the end user in the Middle East. The company also had HMRC arrears of circa £100k. Our team of specialists met the director of the company who was adamant that the business had a future. We introduced a factor who was prepared to fund the invoices to the agent and release sufficient funds for the bank to be repaid and the company to continue trading and employing 8 staff. The company required a factor that was prepared to spend time understanding the issues the business faced. We worked with an independent factor who replaced the bank’s facility and work closely with the business. The bank was delighted to help the client secure alternative funding, which they felt unable to provide. The restriction in funding would have certainly led to the liquidation of the company and subsequent loss of jobs. Due to our understanding of the business and our knowledge of the market we were able to replace the bank facility and the company continues to trade.