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Subcontractor Agency

The Company was formed by the director as a vehicle through which he could supply labour to main contractors specialising in insulation and cold store projects.

The director had had many previous years’ experience in the industry, working as a subcontractor himself and with his industry contacts offering many work opportunities; he formed the Company through which to provide both his own services and those of other subcontractors with whom he worked.

As the director always worked on site, it was not deemed necessary to secure office premises and the Company utilised his home addressed for correspondence purposes.
For working capital, the Company negotiated an overdraft facility from its bankers.  No corporate security was held by the Bank.

Although assignments varied in length, the Company received between £16 / £18 per hour for each individual, from which costs that the company had paid on their behalf, such as travel expenses and hotel accommodation, would be deducted.

Initially, the Company traded moderately successfully and at its peak, the Company employed up to 18 subcontractors and achieved a turnover in excess of £1 million.

However, in many cases, to gain additional turnover, the Company had to reduce its margins eroding profitability.

Regrettably, the Company received a high incidence of complaints relating to work undertaken by certain subcontractors and although those subcontractors had already been paid, the client withheld its payment to the Company creating severe cash flow difficulties.

Subsequently, several of the Company’s key personnel were offered employment by one of the company’s clients and they left to take up those roles. Thereafter, the director struggled to find suitably qualified replacements.

With cash flow challenged, the Company began to face increasing pressure from HM Revenue & Customs following a build-up in its unpaid VAT liabilities.  Further assessments and penalties were levied for non-payment which the Company could not settle. Consequently, HM Revenue & Customs issued a winding up petition for the compulsory winding up of the Company.

In light of the above and despite the Director’s best efforts, he was left with no option other than to cease trading and seek the advice of AABRS.

Upon advice, the Company provided representation at the hearing at which an adjournment was granted, pending confirmation of the Company entering into creditors’ voluntary liquidation.