Staircase Manufacturer

Service(s): Corporate Insolvency Solutions
Sector: Manufacturing

The directors of a £1m turnover staircase manufacturer contacted FRP to discuss increasing creditor pressure, in particular from H M Revenue & Customs, who were threatening to distrain over the company assets. Initially we investigated potential finance/refinance options, however, the company's plant and machinery would not have generated sufficient cash to relieve the pressure and the company already invoice discounted its debtor ledger.

Although the company's order book had improved, it became apparent that the directors were not convinced there was adequate margin in their product due to the aggressive competition in the marketplace. They had previously received advice from another insolvency practitioner suggesting that creditors voluntary liquidation was the most suitable option, however, on further investigation it appeared that the debtors ledger would have been exposed as a significant amount of second phase work was outstanding and customers were unlikely to pay for incomplete product. As the debtors ledger was invoice discounted, this would have led to a potential personal guarantee issue for the directors as many of the debtors would have been irrecoverable.

It was decided that in order to protect the company a notice of intention to appoint an administrator would be filed at court which provided the directors with sufficient time to complete a proportion of second phase work for a number of their customers without the threat of distraint and/or further legal action. Subsequent to the administration appointment employees were retained to finalise more second phase work and also complete work in progress. Leverage was then used over customers requiring new product to clear outstanding debtor balances. The invoice discounter had their indebtedness repaid in full within three weeks and whilst a sale of business was not concluded, the assets were purchased by a company in a similar industry who has subsequently reemployed a number of the former employees.