Here is a snapshot of some of the work we’ve done for individuals, companies and informal solutions and turnarounds.
Informal solutions and turnaround:
Financing – Factoring
This Essex based company has traded for over 12 years mainly working for 1 large customer who, although very reputable, was not the quickest payer in the world. The company had new customers, but did not have the cash flow resources to fund the contracts. Unfortunately, the company had a relatively small County Court Judgment [“CCJ”] against its name.
This was a classic case of an undercapitalised company, winning orders, but in danger of overtrading. MBI made immediate contact with two independent Factoring companies, one of whom had an “in principle” offer in place within 48 hours of meeting with the client and funds released within 10 days of making first contact. MBI was happy to effect the introduction and ensure that the company received a speedy response to its need for cash flow assistance
Financing – Mortgage Lending
Our client owns a number of bridal wear shops in the North West. Having significantly overstocked at the commencement of trading, cash resources had been exhausted. An unlicensed “debt advisor” had recommended an IVA. MBI were introduced to give a second opinion.
Although the cash flow problems were evident, it soon became clear that the client was “asset rich” owning 2 freehold properties which had significant amounts of equity. MBI have been able to introduce a recognised mortgage lender, lending at a very competitive rate of interest, which has allowed the client to meet all creditor claims and put into the operation additional working capital to assist in the business’s growth
Informal Negotiation – Charity
We were instructed to assist a charity which had made losses on an event participation, which meant that there was no realistic prospect of it being able to survive without a substantial debt forgiveness from creditors, including the main promoter of the event. We approached the main promoter and having set out the full financial position of the charity a settlement was negotiated which enabled it to continue operating, also securing the future employment of its small but dedicated work force. A satisfactory outcome for the charity, following a successful negotiation and a realistic acceptance of the position from the creditor. The process took about six weeks from start to finish.
Rescue utilising a standalone Company Voluntary Arrangement [“CVA”]
This supplier of materials to the building trade had enjoyed over 40 years of steady growth and had built up an excellent reputation in the North East of England. Unfortunately, large losses in a venture into house-building had endangered the core business. MBI were called in by the company’s auditors to review the options. The commitment of the board to ensure that both clients and creditors did not suffer was fantastic. A strategy was devised which ensured that the loss making house-building venture was sold off and the core business preserved. In order to get the major creditors “on side”, MBI conducted a series of meetings with the company’s bankers and key suppliers to ensure their support and a formal proposal [via the CVA route] was put to and accepted by the creditors. The continued bank support has ensured that the Materials Supply business continues to operate as normal with a large return to creditors.
Rescue utilising a Company Voluntary Arrangement [“CVA”] – with Protection Order
The company, which owned its own property, manufactured equipment for the knitwear industry in the East Midlands. MBI were called when the bailiff had taken Walking Possession on the plant and machinery in respect of an £8,000 debt and had given the directors 14 days to come up with the money. In the previous 2 years the company had suffered a series of bad debts and its cash resources were exhausted. Overall, creditors were owed nearly £97,000. Our first meeting with the client was the very next day at a motorway service station on the M1 motorway.
The order book was very healthy, with long term contracts with a number of blue chip clients – the directors were very committed, but had used up their own financial resources in covering past losses. A CVA, with a Protection Order in place, was the answer. The client was able to keep the bailiff at bay and thereafter put to all the creditors a CVA Proposal [repayment in full over 3 years] that was accepted. In fact, the company was able to expedite matters and creditors received payment in full within 18 months.
Creditors’ Voluntary Winding Liquidation – Insolvent winding up
We have dealt with many insolvent liquidations over the years, from straightforward liquidations with minimal assets that really just need a proper burial to complex cases involving investigations and legal actions where wrongdoing has taken place to the detriment of creditors.
One recent case involved a detailed investigation of inter-company transactions and claims of misfeasance against the director, which were vehemently denied. With the support of creditors, we instructed solicitors to assist in progressing claims with a view to the issue of Court proceedings. The matter was settled eventually through the use of Mediation process, which provided a much earlier resolution of the claims, and at less cost to all concerned. This contributed to a substantial dividend to the unsecured creditors at a much earlier time than would have been the case if the matter had gone to a full court hearing and ultimately produced a similar outcome for creditors, net of the additional costs that would have expended.
Individual Voluntary Arrangement [“IVA”] – avoiding Bankruptcy
MBI tend to set up IVAs for people running their own businesses. Public Houses are a particular speciality and in this case the Publican has been running a county pub in the Home Counties. After spending over 15 years in the printing industry he and his wife entered into a 20 year lease with one of the major pub operators. Tragically, after successfully reinvigorating the pub business, the wife died and perhaps understandably, the trade suffered, with bailiffs attending on behalf of the landlord.
MBI were able to negotiate terms with the landlord and a proposal was accepted by the creditors, via an IVA, whereby the creditors accepted, over a 5 year period, a 60p in the £ full and final settlement of all claims. The business is now doing extremely well and has successfully exited the IVA.
Bankruptcy leading to Annulment
Most bankruptcies find their way to Insolvency Practitioners via the Official Receiver’s Rota. When a Bankruptcy Order is made, the Official Receiver becomes the initial Trustee in Bankruptcy. Usually where there is a trading business or there are significant assets, the Official Receiver looks to quickly appoint a professional Insolvency Practitioner (IP) as the Trustee in Bankruptcy, utilising the power of the Secretary of State to make appoint an appointment, often the next IP who comes up on the Rota.
We received just such a case. A trading business where the business owner, due to a family bereavement, simply stopped opening those “brown envelopes”. There was a debt of over £190,000 being claimed by HMRC. With the help of external accountants we managed to reduce the HMRC debt to £81,000 and at that stage we then helped the bankrupt to go into an Individual Voluntary Arrangement resulting in him getting his Bankruptcy Order annulled. We were not finished there, however, as following another appeal to HMRC, some of the penalties and interest on the original debt were withdrawn and HMRC’s claim was further reduced by approximately £25,000-an overall reduction of over £135,000. In addition, a significant saving in costs was achieved.
The upshot was that neither the Debtor’s business nor home had to be sold to settle the claims of the creditors.
Solvent Members’ Voluntary Liquidation [“MVL”]
We have extensive experience in MVLs at MBI, both straightforward winding up to release funds to the shareholders in a tax efficient manner and also more complicated reconstruction scenarios, including utilising the provisions of S110 Insolvency Act 1986 to demerge or partition assets in a tax neutral way. These have particular uses where, for example, where parties simply view the future direction of a company differently or there are shareholder disputes.
MVL Following Sale
A recent case we dealt with involved with winding up of a successful family business involving around £2M in cash funds to be distributed, following the cessation of trading, after having sold its freehold property from which the company had previously traded. We were able to advise the Directors as to an orderly winding down of operations over a six month period, providing a “hand holding” service throughout the process, working with the Directors to do as much of the work as possible and thereby minimising the costs. Once the company was essentially reduced to cash, we were able to swiftly assist the directors in getting the company into liquidation and, with the benefit of shareholder indemnities, made an initial capital distribution of the bulk of the surplus within 24 hours of our formal appointment. The shareholders were all full time working directors and employees and they qualified for Entrepreneurs Relief, resulting in their capital gain being taxed at only 10%.
MVL utilising the provisions of S110 Insolvency Act 1986
Section 110 allows for a liquidator to transfer a company’s assets to another company(ies) in exchange for shares in the receiving company. This is a procedure enabling a company’s assets to be demerged or partitioned in a usually tax neutral manner for both the company and its shareholders. We work closely with the company’s existing accounting tax and legal advisers as part of the process.
We were asked to become involved in this case by the company’s existing accountants in respect of one of their clients, a third generation family property investment company, where the current shareholders, representing two separate lines, had different visions as to the future of the company, with the business essentially moribund as the different factions could not agree on a forward strategy. The answer was to split the business and assets into two separate parts, so that each part of the family could control its own portfolio. Tax clearance was obtained in advance and we were engaged to deal with the solvent liquidation process necessary as part of the strategy. The result was that each side of the family ended up controlling their own portfolio with no adverse tax consequences. During this project we worked closely throughout with the existing accountants, tax and legal advisers.
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