The director of an international logistics company based in Hampshire contacted AABRS for financial advice.
The Company was formed to operate as a freight forwarder, primarily within the media and satellite communications sector, which initially traded from the directors home in London.
For many years the Company traded successfully during which time the director moved to Twickenham. In 2006 the director lost two principal contracts following a change of policy within their organisations and conscious that he had to provide income for this family, ceased to trade to take up the employment offered by another one of his clients.
At that time, the Company was solvent and having notified Companies House of the cessation, the Company was deemed dormant.
A few years later the director decided to recommence trading through his limited company. An overdraft facility of £17,000 was negotiated from the Company’s bankers to provide working capital, and secured at that time by the director as a personal guarantee. A fixed and floating charge was later created and registered by the bank.
Having gained new clients, the Company traded moderately successfully until mid-2011, when its’ principal client at that time also failed.
The client was part of a group which restructured via a management buyout, and although no monies were owed to the Company at the time, was advised that the new vehicle would not be continuing to utilise the Company’s services.
Keen to increase the Company’s share of the market, the director recruited an ex-employee of this client company on the basis that he was confident that he would be able to generate new business through his own connections. Thereafter, the Company moved to a rented unit Farnborough.
Unfortunately, this did not prove to be the case and over time the additional costs eroded profit margins and compounded the cash flow difficulties.
With pressure on the economy generally, more and more clients breached their contractual payment terms, by paying late and the director had to fund the business personally, to meet the overhead costs until such time as trading conditions improved. Overall, the director was owed circa £25,000 and had a personal guarantee to the bank of an additional £35,000.
Regrettably, little new business was generated and with no remaining personal resources and little prospect of any improvement in the foreseeable future, the director had no alternative other than to make this employee redundant and thereafter, the company ceased to trade.
With increasing pressure from creditors to discharge the outstanding liabilities of over £150,000, advice was sought and AABRS concluded that the best option was for the company to be placed into Creditors Voluntary Liquidation.
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