Case Studies

Don’t think you’re alone in your current situation.

Here is a selection of stories from people we have helped previously.

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The Construction Company

This established construction company was initially formed in 1998, working in the Construction industry supplying and erecting bespoke metalwork and architectural products.

Over the years the company grew and employed about 25 people. Throughout its trading history the company returned margins of about 4% with turnover reaching £1.25 million per annum.

The company was awarded a contract to supply, fix, strengthen and repair sections of viaducts. The contracts were problematical from the outset with major design issues delaying the start dates for up to six months. These design issues were a separate issue from the company.

After a while it was obvious that the main contractor was suffering substantial losses on the contract, culminating in them deducting a large sum from the final application on the first completed viaduct. This deduction was fought against, without success.

Unfortunately, the nature of the construction industry and the tight margins means that a single contract going over budget or being hit with too many issues can be the undoing of an otherwise profitable business.

Robson Scott Associates Limited were approached and the company was put through a viability review in an attempt to come to an arrangement to pay the substantial bill to HM Revenue & Customs.

However, no viable solution could be found and due to the company’s cash flow problems Robson Scott Associates Ltd advised that the company was insolvent and should enter a Creditors Voluntary Liquidation.

Whilst the company ceased trading and the staff were made redundant, the director chose to try again and bought back the assets of the company and took on a large proportion of the employees who had been made redundant.

The new company is trading extremely well and appears to be thriving under the updated business model.

The Dental Practice

The company was incorporated in December 2006 and provided dental services to clients in the local area. The company traded well but difficulties arose in 2009 following the director’s divorce whereby liabilities then accrued from a joint business venture.

The company attempted to resolve its financial difficulties previously by way of a CVA which was approved in July 2014 and successfully completed in February 2017.

Further financial difficulty occurred when the CVA on the record caused issues regarding dental indemnity insurance led to two six-month suspensions. This limited the company from practicing clinically and caused the company to fall behind on payments.

Attempts were made to raise funds to pay outstanding bills, however a petition was received from HMRC and the company is unable to pay all debts owed. One of the other major issues was that the director had sought to draw funds from the company as tax efficiently as possible and as he was unable to take dividends during the previous CVA, they had accrued a significant overdrawn directors loan account.

The company sought advice from their accountant who contacted Robson Scott Associates to look at the available options for the business. A further CVA was initially considered, based on repayments of the directors loan account, however HMRC were not willing to consider this due to the failure to act prior to them issuing a winding up petition.

As a result it was necessary for the company to enter a Creditors Voluntary Liquidation. With a change to how the business would operate moving forward and stronger input from the company accountant, the director was able to buy the business assets out of the liquidation.

This allowed him to come to a means-based settlement of the directors loan account by working with Robson Scott Associates, instead of leaving the petition to proceed and potentially entering a long legal battle with the Official Receiver or a hostile liquidator, as well as risking losing the business on the making of the winding up order.

If you have received a winding-up petition, this demonstrates that working with a liquidator appointed by the company, instead of leaving it to chance with the Official receiver can leave you in a much stronger position moving forward.

The Haulage Firm

The business commenced trading in 2003 and provided delivery and installation services of electrical goods under a franchise arrangement. The business operated from an office within the franchise distribution centre. As a result the business only had one client and was entirely reliant on them for ongoing business.

Due to the tight margins the Directors sought to keep costs to a minimum with the main outgoing from the Company being staff wages. As a result of trying to minimise the costs, the company fell victim to an extremely poorly executed tax scheme. This caused a significant payroll assessment, upon investigation by HMRC and the threat of a winding-up petition.

As a result the company approached Robson Scott Associates to see what options were available. One of the biggest complications in dealing with the insolvency of a haulage company is the operators licence required for the vehicles. This means that a straightforward pre-pack sale of the business was not possible as the directors would often not have the financial resources required for a new licence.

Being part of a franchise, it was clear that the overall business model was viable under the proper circumstances. A purchaser for the business was found, however, they needed time to obtain the operators licence for the specific vehicles to be transferred to their business.

To facilitate this, Robson Scott Associates were appointed as administrators and continued to trade the business for the interim period whilst the licence was sought. The purchaser was appointed as an agent to operate the day to day runnings of the business, overseen by the administrator, whilst financial control was dealt with by the administrator.

After two months the operator’s licence was obtained by the purchaser and the business was formally transferred to the purchaser, along with the remaining staff whose jobs were transferred under TUPE. The efficient process left trading profits in the business when the company subsequently moved from administration to liquidation.

The Law Partnership

The partnership was originally set up in 2001, running in this format until 2009 when this was converted to a limited liability partnership on the advice of the company accountant.

Having qualified as a solicitor in 2000, the named partner set up her own practice offering a range of legal services. In order to bring down the costs of the professional indemnity insurances and also to receive assistance from someone more experienced, she set the business up as a partnership with another solicitor, who had been practicing for 10 years.

In 2004, the business was informed of an opportunity to take over another partnership, which specialised in criminal law. They purchased the business and appointed a new managing partner.

Problems began for the practice when the practice manager, who was related to the named partner, died suddenly. This caused two issues, being the sudden loss for the in-house management alongside the absence of the named partner, in dealing with the loss.

Further to this, the criminal law part of the business was no longer performing as well as anticipated, and began to cause financial losses within the business.

Following this, the experienced partner in the business fell ill which ultimately caused his untimely and sudden passing. Due to a lack of input from the partners of the business, there was a reduction in work of around 40%. This caused the business to fall into arrears with HMRC and the partners own tax positions.

The criminal law aspect of the business was shut down, focusing on the original competencies and trying to salvage what was left of the business. However, HMRC issued a bankruptcy petition against the named partner. As a result, the advice of Robson Scott Associates was sought to try and rescue the business.

Whilst HMRC were not willing to consider an IVA, due to action not being taken until after a petition was filed, it was possible to place the company into administration and a buyer was found for the business and through a pre-pack sale, based on work in progress and future profits, the business could be rescued and the named partner could be retained as an employee moving forward.

The Chemical Manufacturer

The business was founded in 1995 and provided environmentally friendly chemistry solutions.

The technology was developed between 1995 and 2003 and was based on synergistic formulations of botanical extracts and natural fruit acids. From 2004 onwards, following incorporation, the Company extended this range and eventually branched out into the manufacture of these chemicals.

Over time a number of investors were brought into the Company to facilitate expansion of the Company and in 2009 the Company obtained a loan of £100,000 to further facilitate this expansion.

The Company was successful in obtaining a number of ambitious contracts from several clients. However, these contracts bore highly demanding targets which the Company was unsuccessful in meeting, resulting in a loss being incurred from these contracts.

An additional contract was thought to be secured and the firm started incurring costs in preparation to take on the contract, which would have resulted in a large initial payment to cover these costs. However, the contractor pulled out at the last minute resulting in further losses to the Company.

The Directors attempted to continue to trade the Company in the firm belief that it could be returned to solvency; however cash flow became a problem and the Company began to accrue debts. The Directors attempted to bring new business into the Company but this was still not enough to meet the Company’s aged debts. The Company also fell into arrears with its payments due to HM Revenue & Customs.

As a final attempt the Company sought new lines of financing in order to deal with the growing level of debts. New finance was found in the form of a new factoring service for the Company; however this was insufficient to clear the debts of the Company.

The board of directors sought professional advice from Robson Scott Associates and we carried out a viability review based on the current position. It was deemed there was a viable company there, however the historic debts were too cumbersome for the company to move forward.

Administration was recommended and a pre-pack sale of the company’s assets was arranged, which resulted in a management buyout being the best outcome for all involved in the insolvency. This saved jobs and allowed the business to trade forward, in new premises, free from historic debts.

The Restaurant

The Company was incorporated on 21 February 2012 and took over a tearoom which the director bought for cash. The director then turned the tea room into a coffee shop specialising in homemade cheesecakes.

 

The business traded well for five years and as a result, in January 2017 the director closed the business for a full refurbishment, costing £45,000 which she again paid for using personal funds.

 

Unfortunately the investment did not pay off and by February 2019 the business was struggling following a particularly quiet winter, however business usually picked up due to good weather so the director tried to press on. The director used their personal credit card to fund the day to day business costs, and at the same time stopped taking a wage from the business and had family help out when they could.

 

Trade did not pick up in the Summer as expected so the business ceased trading. In order to mitigate the potential liabilities, the business and lease was put up for sale. Unfortunately, there was no serious interest in taking over the business. Consequently, the director approached Robson Scott Associates, through our Business Rescue Expert website for professional advice.

 

Following the initial consultation, A Creditors Voluntary Liquidation process was recommended to close the company formally. The remaining issue was that, as the director had put their savings and credit cards into the business previously, they were not in a position to cover the costs of liquidation.

Upon liquidation, directors who are registered on the company payroll, will generally be entitled to the usual employment entitlements all other employees receive including arrears of pay, holiday pay, redundancy and compensation for loss of notice.

The director contacted our friends at Redundancy Assist who confirmed their claim would more than cover the liquidation costs and they were able to proceed with the liquidation on this basis.

Bonsers Photography

The company operated an outlet selling photography equipment in Newcastle-upon-Tyne, operating from leasehold premises.

Trading as Bonsers, they first opened in 1959 as a family photographic business taking over a chemists shop. The business grew gradually and with the introduction of cameras that were easier for the mass markets to use and we became established as one of the main photographic and binocular outlets in Newcastle.

In the Eighties a department was opened within Fenwick’s Department store and soon after equipment for making photographic enlargements was introduced, both proving successful.

A mini Lab for developing and printing photos followed which enabled the firm to offer a one hour photo service.

During the Nineties cameras were introduced with many improved features, which encouraged customers to upgrade their equipment on a regular basis. Many members of the public were still mystified by camera technology so were glad to have a face-to-face experience when buying their new devices.

When digital cameras and the internet first arrived on the scene Bonsers took this on board and stocked the latest offerings and set up an internet site to sell goods nationally rather than locally and for a period this worked well. However, once bigger organisations got in on the act, buying in bulk and selling with low markups, it became clear this was not going to work for them.

Over the years shopping centres opened, Eldon Square and the Metro Centre as well as other out-of-town outlets. The car park in the Bigg Market was pedestrianised and parking charges increased dramatically. This made a huge difference to footfall in the local area and also several retail outlets changed into bars or restaurants.

From around the year 2000 turnover started to drop but by sensible buying they were able to maintain margins. Unfortunately however, as conventional cameras became less and less popular, particularly from 2012 onwards, with growing use of digital cameras and smartphones, the store became less and less viable until time eventually caught up with the company.

With the viability of business plummeting and turnover dropping, sometimes below £200 per day, professional advice was sought from Robson Scott Associates about their future.

With the business being outside the scope of the modern market we recommended Creditors Voluntary Liquidation and dealt with the orderly wind down of the company.

We attended the premises to assist with the staff redundancies, supporting them through the difficult time and dealt with the clearance of the shop, arranging buyers for the remaining equipment