Background
BRI Business Recovery and Insolvency were contacted for insolvency advice by the directors of a company that had been providing serviced offices to businesses for nearly 30 years.
As we are all aware, COVID-19 restrictions swept through the country in 2020 and, as a result, businesses obligations and people’s attitudes towards working in-office changed, with a large portion of the working world now either working from home or some form of hybrid working.
Due to this change in working habits, less of the serviced offices were being occupied and revenue dramatically dropped. Having seen the cash-flow forecasts with less offices being occupied, the directors identified this was a serious issue and contacted BRI for further advice. It was clear the company was unsustainable with the decreased revenue and debts were beginning to build.
How Did BRI Help with The Matter of Insolvency?
Once in contact with the directors, BRI provided ongoing advice on how to formally wind down the company and assisted in placing the company into a creditors’ voluntary liquidation, as there were no rescue or recovery plans to explore.
BRI contacted all of the company’s creditors and informed them that the directors had made the decision to cease trading. The remaining tenants were informed of the process and offered alternative premises to which many agreed to transfer to.
BRI assisted with the preparation of a statement of affairs which detailed the assets and liabilities of the company. In this particular case the company had over £80,000 cash held in a company bank account. The company debts were circa £19,000 in HMRC debt with circa £142,000 in unsecured creditors.
What Makes This Creditors’ Voluntary Liquidation Case Different?
As the directors’ sought insolvency advice early, it meant that a significant amount of funds were still held in the company bank account. This enabled a return to creditors.
We see many companies where directors continue to trade and make the position worse, and only at the very end once funds are dried up, then decide to seek professional advice. This results in the company not being able to pay it’s debts which can lead to directors potentially being criticised for wrongful trading and being held personally liable for the loss.
This is why it’s in the clients best interest for coming to us early, as soon as a problem arises. Your first meeting with BRI Insolvency practitioners is free so if you have a concern, please reach out. Seeking insolvency advice early is the difference between a straightforward liquidation and a significantly more complicated one.
What Are The Benefits to Obtaining Insolvency Advice Early?
By obtaining insolvency advice early, it allowed the following to happen:
- The directors fulfilled their legal duty to act in the best interest of creditors
If the company continued to trade and incurred further losses the directors could be criticised for not taking action sooner. - Maximised return to creditors
In this case HMRC were paid 100p in the £ and unsecured creditors are due to receive 22p in the £. This may not initially seem like a great return to unsecured creditors but had the company continued to trade, the cash at bank balance would have decreased and creditor amounts likely to have increased. - Current tenants had a smooth transition from one premises to another
We understand client relationships are key and sometimes being open and honest with people is the best way to keep a working relationship going. Had the directors’ not taken action, the tenants may not have been able to vacate the premises and find a suitable alternative in order to keep their own businesses operating smoothly.
Working with BRI for Success
BRI used decades of knowledge and experience to advise the directors of their duties and assist in swiftly placing the company in to liquidation. This was done whilst maintaining contact with the creditors, keeping them up to date on the progress of the liquidation and keeping distribution prospects realistic.
The directors maintained amicable business relationships with the tenants and the return to creditors was significantly higher than if the directors “buried their heads in the sand” and did not seek early advice on the cash flow issues.
If you or any of your clients are ever concerned about cash flow issues then at BRI we are always willing to have a free discussion to go through your options. We will provide the correct advice based on your circumstances.