When this groundworks contracting business suffered a downturn the directors continued to draw funds from the business despite insufficient profits. This resulted in them having to declare the company insolvent and begin a liquidation process.
MLG Associates attended the creditors meeting representing the largest unsecured creditor. This creditor specifically instructed us to secure the appointment as liquidator, in preference to the directors’ nominated liquidator. Our client had concerns over the effective realisation of assets and wanted to ensure that appropriate investigations into the directors’ conduct would be undertaken. We were duly appointed liquidator.
The Solution - how we helped
This liquidation required both the recovery of funds through realisation of assets and through investigative work to recover debt.
Working with our specialist partners to secure effective recoveries brought significant benefit to our creditors.
With the assistance of Proudly Associates, we sought to identify, recover and sell the physical assets of the company. The assets were shown in the directors’ statement of affairs as estimated to realise £2,500. However, through our investigations, we were able to identify, recover and sell assets worth three times their estimate.
In addition, with the assistance of Leslie Keats, specialist quantity surveyors, we were able to bring together the relevant information to support all the debts due to the company. By doing so, recoveries from these debts amounted to £193,000. This was more than double the directors’ estimate of recoveries.
Thorough review and investigation of the company’s affairs enabled us to identify, quantify and fully support antecedent transaction claims against the negligent directors.
The company’s financial records revealed overdrawn directors loan accounts, unauthorised dividend payments and significant preference payments made immediately prior to liquidation. These investigations should result in us recovering significant funds for creditors.
Early successful recovery of funds meant that preferential creditors were paid in full and an interim payment made to unsecured creditors. We have also reserved sufficient funds to pursue the directors, which if successful will result in further significant returns to creditors.
This case highlights the fact that all too often owner managers treat company money as their own with little regard for the financial performance of the business. Awareness of these issues would allow early corrective action thus mitigating personal risk.