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So why not administration?

Insolvent Concept. Word on Folder Register of Card Index. Selective Focus.

There is never a good time but to do this but on 18 December 2015 the (39) employees of a company in Thetford were given the dreadful news their employer was ceasing to trade with immediate effect. As a result they were all being made redundant forthwith and salaries could not be honoured.

Having recognised the company was insolvent the directors concluded the company must take the steps to place it into creditors’ voluntary liquidation. However, with the natural Christmas break it was decided best to commence the liquidation proceedings at the start of 2016.

During the Christmas break information came forward that suggested cessation of trade was premature and on the advice of PBC, Gary Pettit and Gavin Bates were appointed joint liquidators on 4 January 2016. A week later (and having secured the services of some of those employees that had been made redundant) creditors approved PBC trading the business for the beneficial winding up.

Applying a simple business approach PBC turned around losses to record almost £200,000 of pre-tax profits, which assisted in securing a sale of the business as a going concern. Not only does the sale enhance the assets available for creditors but the purchaser has already started re-employing, together with plans for expansion generally.  All good news for creditors and for the economy of the local area.

Many (including fellow insolvency practitioners) have asked why PBC did not advise placing the company into administration, which is regretfully the standard approach. In reply, Gary Pettit has said,

“The directors recognised at an early stage this company was insolvent and acted upon that determination without delay. There were no legal actions or other (creditor) threats that could damage the business at the time so why incur the additional (high) expense of administration?  Furthermore, there are other legal implications that were avoided in liquidation and this enhanced the purchase price, which in turn promoted a higher recovery for creditors.  Trading under liquidation is uncommon but, in this case, everything pointed towards that approach and the outcome is clearly justifying the view at PBC whereby you consider the best advice for the client, irrespective of the costs consequence for ourselves.”

This matter typifies the ability to think outside of the box and the outcome has protected the jobs of many (not to mention enhanced additional employment for others), protected the interests of creditors (including minimising risks under third party liabilities) and preserved a business requirement for the many customers who relied upon this company’s services.