This case was unusual in that our insolvency related skills were used to carry out the controlled wind-down of a solvent business.
Having decided to retire, the owner/director of a groundworks contracting business approached us to help him close his business in a way that would achieve the best outcome for his staff, creditors and himself.
Although the business was solvent it had begun to be impacted by its largest customer employing workers directly instead of subcontracting. In addition, delayed payments from its major customer were causing cashflow implications that could have adversely affected the company’s value for shareholders if not addressed.
The Solution – how we helped
Having reviewed the business we were able to clarify the value of its assets and ensure that it was solvent. We were then able to agree a strategy to achieve a managed wind-down that benefitted all parties.
As part of the controlled wind down, a small part of the business which serviced another customer and remained viable was “hived off” into a separate business so that the management team could continue to operate that business. MLG Associates were able to introduce a funder to that business which enabled a seamless transition.
In addition, we assisted the management team to facilitate the transfer of some remaining 90+ staff to the company’s main contractor. This strategy safe-guarded employment for some 90+ individuals and mitigated significant redundancy obligations that the company otherwise faced and which could have impacted on the solvency of the business.
Once these measures had been put in place, the business was then put into Members’ Voluntary Liquidation and Mike Grieshaber of MLG Associates was appointed Liquidator.
The priority now was to realise the full value of the business.
Firstly, we arranged for the successful auction of £500K of equipment in association with our valuer, Mark Proudley of Proudley Associates Limited.
Secondly, with the assistance of Leslie Keats, specialist quantity surveyors and management consultants, we negotiated and recovered £2.5M worth of contractor debt. Acting early in the liquidation process and being thorough in providing extensive documentation to support our claims were vital in securing the early recovery of such significant debt.
These two measures enabled us to achieve a highly favourable result for all parties:
- All bank lending was repaid within 3 months of liquidation
- All creditors were paid in full with statutory interest
- A significant proportion of funds were returned to shareholders.