The company had been trading since 2008 and had built a good reputation in the market place. New work was obtained principally through word of mouth. The director had been the only employee until February 2015 when the company took on another employee to assist with the increase in work.
In the latter part of 2015 the company began to experience issues when its only employee was unable to work. The director worked hard to try and ensure all works were completed and the high level of service that customers had grown to expect was maintained.
Although the other employee returned to work in early 2016, this was only for a short period until April 2016 when he went on long term sick leave. The director focused his efforts on completing work, however, having to pay statutory sick pay and not having any help to complete orders meant that the company began to experience cashflow difficulties.
Unfortunately, in September 2016, the director suffered a major stroke and as such was unable to work. The other employee resigned at the end of September having been on sick leave since April 2016. This meant that the company was unable to complete customer orders and maintain the service contracts. The director arranged for the ongoing customer service contracts to be maintained by a friend who also worked in the industry. This allowed time for the director to review the company’s financial position. By November, it was clear that the director would be unable to work for some time. The director sought our advice and we recommended that the company be placed into liquidation as the company was insolvent. However, we were mindful that there were a significant number of customers who had maintenance contracts with the company which would be affected by the company’s insolvency and would potentially have claims against the company as it was unable to fulfil the contracts. We were also conscious that the company had an active database of customers which could be sold.
If a purchaser could be found, it would mean that the customers would hopefully be taken care of by the purchaser and also the creditors would benefit from the sale. As time was of the essence, we instructed independent agents to send a flyer to local alarm companies. They received interest from a number of parties and after receiving offers from two parties, a sale was agreed on the recommendation of the agents.
We are pleased to report that the sale has resulted in unsecured creditors receiving a dividend, which they would not have received if a sale had not taken place. In addition, the customers are pleased that they have an opportunity to enter into new maintenance contracts with the purchaser and the director has peace of mind that the company’s customers are being taken care of.
This case demonstrates that the advice given to the director and the strategy applied by Portland worked to the benefit of the company’s creditors and customers.