Imminent insolvency - what are my options?

[MattSands]

Business has been tough, not made a profit this year. A dozen (some longstanding) staff. £75k in the bank. April losses £25k!

As I saw it my options were:-

• a) to close the door, sever client relationship, pay redundancies.
• b) Keep ploughing on to the bitter end hoping I can either turn it around or money runs out meaning staff only get statutory redundancy.
• c) make enough redundancies to bring overheads down to stop the ship tilting

So, we don't really want to close, we will have no income and are probably unemployable (we thought we would be retiring this year!) so we thought option c.

Looking at the official process, it looks like the time it will take to go through consultation and the notice period plus redundancy payments is probably going to finish off the money meaning everyone is out of a job.

I don't know how it get advice. Hr advisor tells me the process, accountant has been useless. Government helpline. ha!

Can anyone give me any meaningful advice please?

 

[Robert Moore]

You can give me a call on 07584 583884 and I can give some advice now. We run the site www.companyrescue.co.uk

 

[Robert Moore]

Without knowing the full story it is difficult really to advise. The key is really if you have any creditors? how much are they owed? Are you actually insolvent or not?

 

[MattSands]

Without knowing the full story it is difficult really to advise. The key is really if you have any creditors? how much are they owed? Are you actually insolvent or not?

We dont owe any money. We still have money but it will be gone very soon

 

[Robert Moore]

how much would redundancy cost the company? It is possible, or certainly used to be, that you could contact the Redundancy Payments Office and get a loan/grant to pay redundancies if it could be shown that it would save some jobs in that it would stop the company becoming insolvent. In effect if the company did go insolvent then they would end up paying more as arrears of pay redundancy would be picked up by them anyway.

 

[Frank Wessely]

Business has been tough, not made a profit this year. A dozen (some longstanding) staff. £75k in the bank. April losses £25k!

As I saw it my options were:-

• a) to close the door, sever client relationship, pay redundancies.
• b) Keep ploughing on to the bitter end hoping I can either turn it around or money runs out meaning staff only get statutory redundancy.
• c) make enough redundancies to bring overheads down to stop the ship tilting

So, we don't really want to close, we will have no income and are probably unemployable (we thought we would be retiring this year!) so we thought option c.

Looking at the official process, it looks like the time it will take to go through consultation and the notice period plus redundancy payments is probably going to finish off the money meaning everyone is out of a job.

I don't know how it get advice. Hr advisor tells me the process, accountant has been useless. Government helpline. ha!

Can anyone give me any meaningful advice please?

Business has been tough, not made a profit this year. A dozen (some longstanding) staff. £75k in the bank. April losses £25k!

As I saw it my options were:-

• a) to close the door, sever client relationship, pay redundancies.
• b) Keep ploughing on to the bitter end hoping I can either turn it around or money runs out meaning staff only get statutory redundancy.
• c) make enough redundancies to bring overheads down to stop the ship tilting

So, we don't really want to close, we will have no income and are probably unemployable (we thought we would be retiring this year!) so we thought option c.

Looking at the official process, it looks like the time it will take to go through consultation and the notice period plus redundancy payments is probably going to finish off the money meaning everyone is out of a job.

I don't know how it get advice. Hr advisor tells me the process, accountant has been useless. Government helpline. ha!

Can anyone give me any meaningful advice please?

As Robert Moore says, there are many issues to consider and you should consult an IP to ensure that correct steps are taken without unecessary delay. You can call me on 07770 210628 for a no-obligation discussion, or call Robert or any other IPs who are part of this group.

 

[Lisa Thomas]

Only you will know the right answer as regards the possibility of trading on successfully but it sounds like you already know the answer, in which case option A sounds feasible if you have enough to pay all the employees off.

If not, you may need to explore liquidation.

You have already had 2 kind offers to give advice above but I'd be happy to chat if required.

 

[The Byre]

Firstly, I would talk to all three and make detailed notes on what they say.

Business has been tough, not made a profit this year. A dozen (some longstanding) staff. £75k in the bank. April losses £25k!

Ouch!

If you opt for option three - struggle on - you must calculate carefully a pathway between the rocks and do two things first -

1. Tell the staff that your back is against the wall, so if any of them have another gig to go to or are thinking of retiring or whatever, now is the time to go! "We do not have the funds to pay everybody redundancy payments!"

2. Give everybody who has been there for less than two years their notice.

If you can maintain turnover at present or somewhat reduced levels and you can shed at least half the staff, you might be able to find that passageway between the rocks.

BUT be warned - the economy is going to tank completely, so you must be able to hold your breath for about three-to-five years before the sun will shine again. Nobody knows just how bad things will get and everything depends on what this and other governments around the world will do. If they decide to go back to Pinocchio's Magic Money Tree when they can no longer meet their obligations, all bets are off and high inflation takes over!

 

[Newchodge]

How many staff?
How many staff with more than 2 years's service as at 1 May?
Weekly gross wage for each staff member?

 

[MattSands]

Without knowing the full story it is difficult really to advise. The key is really if you have any creditors? how much are they owed? Are you actually insolvent or not?

we don't really have any creditors, couple of thousand maybe. Still owe VAT, will check how much.

We are solvent today but it's getting close to the wire, ironically it's the redundancy payments for longstanding staff that will probably finish us off.

 

[MattSands]

Firstly, I would talk to all three and make detailed notes on what they say.

Ouch!

If you opt for option three - struggle on - you must calculate carefully a pathway between the rocks and do two things first -

1. Tell the staff that your back is against the wall, so if any of them have another gig to go to or are thinking of retiring or whatever, now is the time to go! "We do not have the funds to pay everybody redundancy payments!"

2. Give everybody who has been there for less than two years their notice.

If you can maintain turnover at present or somewhat reduced levels and you can shed at least half the staff, you might be able to find that passageway between the rocks.

BUT be warned - the economy is going to tank completely, so you must be able to hold your breath for about three-to-five years before the sun will shine again. Nobody knows just how bad things will get and everything depends on what this and other governments around the world will do. If they decide to go back to Pinocchio's Magic Money Tree when they can no longer meet their obligations, all bets are off and high inflation takes over!

Some good advice, thank you. Ironically the people i could make redundant would be instrumental in a turnaround if it were possible.

 

[MattSands]

How many staff?
How many staff with more than 2 years's service as at 1 May?
Weekly gross wage for each staff member?

14,10. i'll need to work that out.

 

[Frank Wessely]

14,10. i'll need to work that out.

Hi MattSands, in danger of repeating earlier comments, I suggest that you speak with me or one of the other IPs in this group. This is the only way that we would be able to see the full picture and that you can gain meaningful advice. Regards, Frank.

 

[Lisa Thomas]

Some good advice, thank you. Ironically the people i could make redundant would be instrumental in a turnaround if it were possible.

If you started again under a Phoenix umbrella you could hire them back, but you would have to tread carefully around T.U.P.E. It doesn't apply in liquidation unless the reason for liquidation is to avoid the redundancy so it would be relevant to your situation...

 

[IanSuth]

If you started again under a Phoenix umbrella you could hire them back, but you would have to tread carefully around T.U.P.E. It doesn't apply in liquidation unless the reason for liquidation is to avoid the redundancy so it would be relevant to your situation...

You say that but I was involved in a phoenix, the IP told us no TUPE and only 2 staff went to work for NewCo who only did a small part of the work that oldco covered (about 25%), the staff of Old Co applied to RPO completing forms given to them by IP, RPO fouhgt it and went to IT who found that the cleaner (even though new co was in a serviced office and cleaner had been self employed), and accountant (who had retired previous April and just came back on an ad hoc basis) were entitled to £16k between them, if other staff had had over 2 years they to would have had a claim. !!

It worked for me as I was an employee and director of oldco but just an employee of newco and I got a determination of TUPE off it which put us off on the wrong foot with new owners (liabilities and having to honour old employment contract) but protected some of my rights like holiday and payment of professional body membership

 

[Chris Ashdown]

It great you consider your staff, but if you do go bust the government will pay any redundancies you don't make, so staff due redundancy will not be adversely effected just a slight delay in getting their redundancy payments

The IP costs may gobble up quite a bit of the 25K so get quotes for a fixed price

Staff with under 2 years service do not get redundancy

With no creditors you need to make sure you don't have a directors loan account in the negative so need to make sure accounts are up to date

There is a method called the SpongeBob (details on this site somewhere) where you don't have to go via a IP (who will try and get as much of the money as possible) so paying redundancy before you appoint a IP may be a good use of the money
option

 

[MattSands]

Had several chats with @Frank Wessely,. He came across very well and knowledgeable.

Thank you Frank.