The company was run by its two directors who were both plasters working in the Poole, Dorset area and both directors had the requisite skills and expertise which they believed would be sufficient to run the Company.
Initially, the Company’s primary focus was on the domestic market, targeting small ad hoc jobs for private individuals and in its first year the Company traded with modest success.
Thereafter, the Directors sought to expand the Company’s customer base, using their contacts in the industry to secure work with a number of small builders on bigger projects, including on several new-build developments. In order to cope with the increase in workload and meet the associated time schedules imposed by the builders, the Company took on additional sub-contractors to support the Directors.
Whilst working on these projects, the Directors noticed a gap in the market for supplying liquid screed and spray rendering, both techniques offering greater speed and efficiency of application than traditional plastering methods. The decision was taken to invest in pumps accordingly, with credit accounts also being set up with various suppliers.
In the months subsequent, the Directors concentrated on the provision of these services and the business began to grow rapidly as a result, with the Company going on to secure all of the rendering work for one of the largest dry-lining companies in the south of England, counting several national house builders with substantial developments among its clients. This growth was reflected in the Company’s financial statements, with turnover rising.
During this time, the Company acquired new pumps as well as additional vehicles under finance agreements in order to meet the rising demand for its services. Whilst there were sufficient funds available to support this, the switch from smaller residential work to larger corporate projects was accompanied by a change in payment terms, with the Company no longer being paid on completion but after 30 days or more and having already supplied the relevant materials.
However, this placed pressure on the Company’s cash-flow, which was further compromised when, approximately a year after they had started working with a dry-lining company, that business fell into financial difficulties. A significant amount was still outstanding to the Company at that time and although these monies were eventually received, payment was protracted over a period of several months. In order to alleviate the cash-flow position, the Company sought and utilised an overdraft facility provided by its bankers which was secured by the personal guarantee of the directors.
Following the loss of this work, the Directors immediately set out to source new contracts and were able to take on a number of new projects working directly for the larger builders. One of the Company’s main clients at that time was a larger developer with several sites across southern England. The Company was engaged to supply and install all the rendering, floor insulation and screed on one of their new-build housing developments, with payment generally being made on time and only the occasional late remittance.
However, on completion of the last phase of the project, the Directors were informed that the developer had run into a period of financial strain and had entered into Administration leaving a large bad debt.
The bad debt had severe repercussions for the Company’s own financial position, as with work from other clients slowing down and its income significantly reduced, it was unable to make timely payments to its own creditors. Although attempts were made to negotiate a payment plan with one supplier that no longer wished to deal with the Company due to the high level of arrears, the Company struggled to meet its obligations.
With creditors threatening to instigate recovery action by issuing winding up petitions, the situation was fast untenable and it became clear that the Company could no longer continue to trade.
The Directors sought advice via their accountant and were recommended to AABRS who placed the Company into creditors’ voluntary liquidation. Independent valuers were instructed to value the business and assets and these were eventually sold to a company which the directors were connected to. The appointed Liquidator at AABRS was able to realise the assets of the company and utilise the corporation tax losses to obtain a tax refund due to the company and this meant a distribution was paid to creditors.