2 December 2015: The BRI Banbury office was approached to assist an Oxford based company working in the construction industry which has 60 employees, £1.7M of debtors and owed some £1.1M to creditors including, in large part, the Crown.
No problem you might think. Assets are well in excess of liabilities.
However, the Crown were threatening recovery action as monies due to them were becoming significantly overdue. The company had made promises that they were now unable to keep. Time was fast running out.
BRI introduced a specialist firm of QS and Contract Valuers. Their view on the value of the debtor book and WIP was that recoverability on a formal insolvency appointment basis would be at the lower end of a £150 - 440k range and on a going concern basis between £1.1 - 1.4M.
Clearly, on a formal insolvency appointment, there would be a significant reduction in the value of the company assets and there would also be a significant claim from employees for redundancy, pay in lieu of notice etc., which were not included in the current list of creditors. What to do?
BRI contacted HMRC's Insolvency and Debt Team, shared our findings with them and encouraged all concerned to come up with an offer that was achievable and which avoided the affects of a formal insolvency process. The accountants helped the company to produce a cash flow forecast and HMRC were offered a significant immediate payment together with a similar payment after one month and the balance to be paid over the following three months. The offer was accepted and the first payment has now been made.
It is early days. However, in the event that plans unfold better or worse than envisaged, the dialogue is open and the future payments will be flexed accordingly with full disclosure as to which debtors may have paid earlier than anticipated or remain unpaid.
A great result for all concerned, with the exception of BRI. The accountants were delighted to have avoided a seemingly certain client liquidation with significant job losses, attrition on asset values and a bad debt for themselves and for all creditors, including in particular, the Crown.