debts but company has assets

[Robyn Laurence]

Hi,
Myself and several others have been made redundant from a company that has no cash in the bank but assets I estimate to be around £30k +

Business premises have been taken back by landlord so literally no job for us.

As far as I can tell he owes money to a lot of companies but less than his assets.

Should he be selling assets to clear business debt and pay money due to us? Can we force him?

What will happen? I think spongebob only works if no assets? Is he actually insolvent if assets are more than debts/wages owed?

This is all a bit of a shock and I’d be grateful if any help please about what’s likely to happen.

Many thanks

 

[Gavin Bates]

Hi

Quick question you mention that the landlord has taken back the property. Is this where the assets are, because it sounds like the landlord has a big outstanding bill and will sell the assets to pay his debt.

Regards

Gavin

 

[Robyn Laurence]

Hi Gavin
He does have assets at business premises but the landlord has told him to make an appointment to get the stuff out. I thought this was odd as I would expect them to hold on to them. The majority of his assets - vehicles - are in a unit away from that site. He also has an office with limited assets, computers etc. The landlord (council) don’t appear to be going down the winding up route..again that feels odd

 

[Ian J]

The landlord (council) don’t appear to be going down the winding up route..again that feels odd

Winding up a company is expensive and there is no point doing it unless you think it will bring a return

 

[Robyn Laurence]

So what will they do to get their money? It’s council so effectively “public” money?

 

[Chris Ashdown]

Do you know for certain that he owns them or are they on lease or HP etc, second hand computers are not worth anything apart from a couple of quid. Many items like stock and office equipment sent to auction by the liquidator often only fetch about 10% of retail price

The liquidator costs will be in the thousands and will most likely take up all the outstanding money

Your claims will be handled by the government funds, redundancy, holiday pay etc

ps strong chance he will also have a overdraft or secured loans to gobble up that 30K

 

[Robyn Laurence]

All assets are owned outright apart from few things in kitchen ...coffee machine, slush machine (it’s a cafe.

Will the company be liable for any staff costs or is it all from government?

 

[Mr D]

Hi Gavin
He does have assets at business premises but the landlord has told him to make an appointment to get the stuff out. I thought this was odd as I would expect them to hold on to them. The majority of his assets - vehicles - are in a unit away from that site. He also has an office with limited assets, computers etc. The landlord (council) don’t appear to be going down the winding up route..again that feels odd

Council will get their money from the same pool of money as all other creditors including you.

Assets will be sold and creditors paid pro-rata. Often assets sell for a fraction of what they are worth.

Council could spend a few grand to wind the company up, however unless that gets them a lot more money for creditors then its not worth the cost. The company still has the same assets to sell anyway.

 

[Robyn Laurence]

So what SHOULD he be doing g now? He thinks he’s going to liquidate company, sell assets and keep the money

 

[Mr D]

So what SHOULD he be doing g now? He thinks he’s going to liquidate company, sell assets and keep the money

Does it matter? If you feel you are not getting what you should then pay to wind the company up.

Assets of £30k - figure around £3k, maybe lucky and go as high as £5k. Between all the debts, with several grand spent for a liquidator - now how much would you get if assets liquidated for £3k and liquidator costing £4k.

 

[Robyn Laurence]

He has asked my advice as I lost a company a long time ago not on this scale tho. So I said I’d get advice for him and staff. He’s currently gone into meltdown which is understandable but won’t deal with it

 

[Mr D]

He has asked my advice as I lost a company a long time ago not on this scale tho. So I said I’d get advice for him and staff. He’s currently gone into meltdown which is understandable but won’t deal with it

If he's the sole director then no one else can deal with it.

 

[Ian J]

So what SHOULD he be doing g now? He thinks he’s going to liquidate company, sell assets and keep the money

That is illegal.

If it were me and I owned a company that had minimal assets and no cash that was insolvent I would just leave it until either someone wound it up or Companies House struck it off

 

[Robyn Laurence]

I’m definitely not going to deal with it just support and pass some info on that may help him.

 

[Robyn Laurence]

Ian J

The assets aren’t minimal he has work vehicles and other assets worth in excess of £30k easily

 

[Robyn Laurence]

I think he should sell all assets ASAP and pay all staff and creditors and then think about liquidating. Does that sound ok?

 

[Mr D]

I think he should sell all assets ASAP and pay all staff and creditors and then think about liquidating. Does that sound ok?

He needs to do payment pro-rata if he is paying anyone. Subject to priority of payments - some payments may well be higher legal priority than others.
Ideally he needs professional advice from an insolvency practitioner.

A café with work vehicles for which there is no finance? Cool.
Remember, even those will probably not go for what they are worth.


The normal process would be to get insolvency practitioner in, they'd liquidate assets and pay creditors, investigate director and shut down business in an orderly fashion.
However when cannot afford to use an insolvency practitioner the common method is use spongebob plan (yes that's what its called here) or wait for companies house to dissolve the company based on lack of paperwork.

 

[Robyn Laurence]

Can you do a spongebob if there’s more assets than debt? Is the company even insolvent if it has assets to pay creditors?

 

[Mr D]

Can you do a spongebob if there’s more assets than debt? Is the company even insolvent if it has assets to pay creditors?

Creditors generally want cash, not assets.
Have lost count of companies I have come across with assets but no cash, that went under as a result.

 

[Robyn Laurence]

So sell as much as he needs to pay creditors off then liquidate? Doing nothing is not an option as he’s paying for a unit for vehicles and obviously can’t afford it

 

[Mr D]

So sell as much as he needs to pay creditors off then liquidate? Doing nothing is not an option as he’s paying for a unit for vehicles and obviously can’t afford it

If the same company is paying for that unit then that landlord is also a creditor.
And company leases often run for years, with the total remaining on the lease being owed if company stops paying.
Personal guarantee from the director or directors is also common - so company stops paying the landlord chases the director personally for entire remaining lease, until a break clause or new tenant.

If liquidating everything doesn't generate enough to cover all debts, common enough, then creditors get a share of the pot and told there's nothing else.
SpongeBob plan letter invites creditors to wind company up (may not be worth it) and then after ceasing trading for 3 months director sends form DS01 to companies house, copy to all creditors.
If no one objects (HMRC usually do object) then company dissolved a few months later.
Company debts die with the company, with exception of ones with a personal guarantee.

 

[Newchodge]

You and the other staff need to contact ACAS to start the process of issuing employment tribunal claims for wages, holiday money, notice money and redundancy pay, as appropriate. Only then will you be able to get some of the money owed from the government, unless he winds the company up properly.

 

[Ian J]

Can you do a spongebob if there’s more assets than debt? Is the company even insolvent if it has assets to pay creditors?

No. The spongebob plan is for companies with no assets.

A company is insolvent if it cannot meet it's debts on the due date or if there are more liabilities than assets

 

[Alan R Price]

As regards your rights as an employee, a good place to start is here: https://www.gov.uk/your-rights-if-your-employer-is-insolvent/your-rights. You will have a claim against the company, at least part of which could be met by the government's insolvency scheme BUT this will only kick in if the company is in a formal insolvency procedure, such as liquidation.

You could wait for the director to put the company into creditors' voluntary liquidation but as employees, you could club together to share the costs and apply to the court to wind up the company (put it into liquidation). Although you will have to pay them first, the costs will be a priority claim against the assets of the company, so you will get repaid first, before any creditors' claims are paid. You will need a solicitor to do this but it is a straightforward process. You seem to be confident there are assets of £30k or more, so this would appear to be a low-risk strategy although it will invlove an initial outlay, the size of which, individually, will depend on how many of you are prepared to share them.

The Spongebob Plan is not appropriate because there are assets.

 

[Robyn Laurence]

Alan thank you...can I just clarify...so we can only claim government help with redundancy if company is in formal liquidation process?

 

[Alan R Price]

Alan thank you...can I just clarify...so we can only claim government help with redundancy if company is in formal liquidation process?

Unless the rules have changed since I gave up practice, yes. The Guidance Notes say:

"Claiming for redundancy, unpaid wages and holiday pay
You can apply as soon as you’ve been made redundant. The person dealing with the insolvency (the ‘insolvency practitioner’ or ‘official receiver’) will give you a ‘CN’ (case reference) number. You cannot claim without the CN number.

You must apply for redundancy pay within 6 months of being dismissed."

That indicates to me that the same rule applies.

 

[Mr D]

Alan thank you...can I just clarify...so we can only claim government help with redundancy if company is in formal liquidation process?

Its also not massively generous compared to some companies making staff redundant while trading.
Can also take a little while to payout when snowed under from what people have said.

 

[Robyn Laurence]

There are some staff on casual contracts are they employees or do they have to apply for creditor status? They are owed money

 

[Chris Ashdown]

Were they on PAYE

 

[Robyn Laurence]

Were they on PAYE

Yes

 

[Gavin Bates]

Hi

I think he needs to talk to liquidator. The truth is he should appoint a liquidator, deal with the process probably. The employees can then claim against the redundancy payment service for what they are owed and hopefully, the director can sort himselves out.

Regards

Gavin

 

[Newchodge]

Alan thank you...can I just clarify...so we can only claim government help with redundancy if company is in formal liquidation process?

I understand that you can also claim certain amounts if you have an employment tribunal judgment and the employer has ceased to exist. Check with ACAS

 

[Lisa Thomas]

The Director needs to take proper advice from an IP.

It will be risky for him to sell the assets and pay creditors off himself as he could find claims of misconduct brought against him subsequently by an IP appointed (for example for illegal preferences of selling assets at an undervalue) so he must take care to ensure everything is done properly.

If the Company enters Liquidation then the employees can claim monies from the government scheme.

If it doesn't enter a formal insolvency procedure then the employees will have to go down the tribunal route and claims will be limited to redundancy only (not notice, holiday, wage or pension arrears).

 

[Robyn Laurence]

Thank you so much everyone I really appreciate your help

 

[Lisa Thomas]

You're welcome. Good luck.

 

[Robyn Laurence]

Sorry could I have further help with this please.
Ex employer has submitted form to companies house to voluntarily strike off business.
Business is insolvent.
He traded up to 18th October 2019. I thought you had to wait 3 months from ceasing trading before submitting application is this right?
Several of us are entitled to redundancy pay and he says that he only has to offer us statutory redundancy (not notice and holiday etc) but surely if he pays anyone, that will be favouring "creditors" and will be illegal? is that right? Surely we dont have to accept his "offer"?

 

[Robyn Laurence]

Sorry could I have further help with this please.
Ex employer has submitted form to companies house to voluntarily strike off business.
Business is insolvent.
He traded up to 18th October 2019. I thought you had to wait 3 months from ceasing trading before submitting application is this right?
Several of us are entitled to redundancy pay and he says that he only has to offer us statutory redundancy (not notice and holiday etc) but surely if he pays anyone, that will be favouring "creditors" and will be illegal? is that right? Surely we dont have to accept his "offer"?

 

[Robyn Laurence]

Sorry could I have further help with this please.
Ex employer has submitted form to companies house to voluntarily strike off business.
Business is insolvent.
He traded up to 18th October 2019. I thought you had to wait 3 months from ceasing trading before submitting application is this right?
Several of us are entitled to redundancy pay and he says that he only has to offer us statutory redundancy (not notice and holiday etc) but surely if he pays anyone, that will be favouring "creditors" and will be illegal? is that right? Surely we dont have to accept his "offer"?

 

[Robyn Laurence]

Apologies dont know why that posted twice

 

[Chris Ashdown]

When I called in a IP, the day before I paid all outstanding wages to my staff, but redundancy payments were left for the IP to sort out via the government scheme, so i assume redundancy would be a preferential payment and against the law if other creditors also had a claim