Background
- The Company traded as a medical training services provider from 2004
- One of only a small number of companies in the UK to hold a contract with the NHS for the provision of temporary staff
- Turnover in 2010 in excess of £2.3 million
- Assets with a book value of £200,000 although the majority of this was book debts subject to an invoice financing agreement
Problem
- The invoice finance company amended their terms of business with the company which meant a lower pay out coverage
- The company experienced a high level of bad debt, £150,000 in the year leading up to the Administration
- As a result, cash flow and profit margins were compromised
- There was a breakdown in the relationship between the directors and communication in respect of the company was limited
- One director dealt with the financial affairs of the business and limited the information provided to the other director. Sufficient financial management systems were not in place and therefore the poor financial state of the company was not accurately presented
- Significant creditor pressure particularly from the Revenue and secured creditors (the bank)
- Stress caused by creditor pressure on the directors
- The company had creditors in excess of £350,000
Solution
- A member of the Parker Andrews team met with the directors shortly after they made contact for initial advice at a location convenient for them
- Parker Andrews provided the directors with all options available to them.
- It was considered that due to the existing contracts, the business could still be viable and therefore the decision was made to market the business with a view to completing a pre-packaged sale on the day of Administration. Trading in Administration would not have been viable due to the terms of the NHS contract.
- Parker Andrews contacted all creditors, including HMRC and the secured creditor, alleviating pressure from the directors immediately.
- Parker Andrews dealt with redundancies and assisted employees with their forms to claim redundancy from the National Insurance Fund
- An agent was instructed to formally value the assets prior to the Administration. After significant marketing, one of the directors put in an offer for the business and Parker Andrews achieved a sale for in excess £25,000
Conclusion
- Company entered Administration
- The pre-packaged sale was completed
- Creditors were informed and dealt with by Parker Andrews
- Employees claims were sent to the Redundancy Payments Office immediately after the company entering liquidation and claims to Employees were paid shortly after
- The invoice finance company were paid in full and the surplus from book debt collections was realised totalling £45,000
- The remaining cash in the company’s bank accounts was realised totalling £50,000
- The Administration concluded by way of a conversion to liquidation and unsecured creditors were paid a dividend of 25p in the pound, in addition to the costs incurred in the liquidation being paid.
- Importantly for the director all stress and pressure was alleviated immediately
