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Are you an insolvency practitioner? We have put together a selection of case studies from clients we have helped within the industry.
Liquidation – Claims against Directors
Debt: £200,000 (estimate)
Challenge: We were appointed by the liquidators in 2019 to carry out the investigation into the actions of the directors prior to the liquidation of the company and pursue any liability that may exist.
Solution: Following our review we identified various potential claims against the directors, however further company documentation and explanation was required from the directors. Unfortunately there was little cooperation, which hampered our review. Confident that a significant claim existed, we utilised our no cost litigation service. Applications were filed for a S236 examination. With the additional information needed, a case was established and the directors entered into more reasonable discussions on a settlement.
Result: Settlement of £130,000 achieved resulting in a dividend to creditors.
Glazier
Challenge: Our client, the Liquidator of the Company, passed us the remaining debtor ledger 10 months after their appointment, at which point no further debts were considered collectable.
The company was a glazing supplier and installer and the ledger was a mix of domestic and commercial clients.
Given the nature of the business, the debtors had issues with warranties and incomplete works which meant that we had to assess each debt on an individual basis, in order to maximise recoveries for the benefit of the creditors.
Solution: We collated the relevant invoices and worked methodically through the ledger. Where issues with warranties, complaints and counterclaims arose, we worked through the issue to seek an amicable resolution to each account.
Result: Against a remaining ledger of c.£128,000 of which most debts were now a year old and subject to queries, £55,000 was collected. A recovery of 43{33ddf7b5ad3dbf17894843a83128c9e530756aa55b5972ffa080cd81c7bd73af}.
Illegal Dividends
Challenge: Our client was appointed Liquidator of the Company. We were instructed to investigate an overdrawn directors loan account.
Solution: My Debt Recovery carried out a full review and in addition to the Director’s Loan Account of £54,000, we identified other potential claims. Further investigation highlighted that dividends had been paid from the net assets of the company, which included an intercompany debt of £28,000. We were able to show that at the time of the dividend payment, it was known the intercompany debt would never be paid back and should have been written off. In addition, we were able to show that there were not distributable profits for a further element of the dividend, resulting in a total claim against the director of £90,000.
Result: Following negotiation with the director, a settlement agreement of £80,000 was reached and to be paid from their share of the sale of the matrimonial property and a solicitor’s undertaking was obtained. Three months later payment of £80,000 was received in settlement of the overdrawn loan account and intercompany transfer.
Directors Loan Account
Challenge: Our client was appointed Liquidator of the Company two years prior. A potential Directors Loan account of £60,000 needed to be confirmed and pursued. The loan account was not clear as there was significant movement, due to items purchased for the business by the directors on a regular basis. To date the directors had been uncooperative.
Solution: We reviewed the financial information which include hundreds of entries and split out those that appeared to be business expenses and those that required more information. Invoices from the books and records were cross referenced and reconciled.
We liaised with the directors and persuaded them that cooperation was in their best interests. Further supporting evidence was provided and a resulting ‘unexplained’ list of entries produced.
Result: Following discussions with the directors, a settlement of £30,000 was achieved within 4 months of our appointment, without the need for legal proceedings.
Furniture Manufacturer
Challenge: Our client was appointed Administrator of the Company in January. Initially, their collections were managed in-house. At the end of March 2020, we were asked to review the ledger and commence collections, just as the COVID lockdown commenced. The Ledger was £80,000 across c.70 accounts.
Solution: The initial challenge was the gathering of paperwork where the company had a legacy non-windows based IT system. Following reconciliation of the ledger, it was quickly apparent that a number of the debts related to invoices over 2 years old.
We attempted to engage with the debtors through various communication channels, which became more protracted than would usually have been the case. We worked with the debtors to achieve realistic payment plans. Where debtors failed to co-operate, county court judgments were obtained and High Court Enforcement actioned.
Result: £49,000 collected over a period of 6 months.
Overdrawn Directors Loan Account
Challenge: Our client was appointed the Liquidator of the Company and subsequent to their appointment, the Director moved overseas. A potential Directors Loan account of £18,000 needed to be confirmed and pursued.
Solution: We reviewed the financial information and liaised with the previous accountant to confirm the existence of the Loan Account. A UK address was found but the individual had now permanently moved overseas. However, as a result, we managed to communicate via email. We also identified a further potential claim for Wrongful Trading and/or trading on Crown Monies.
Result: Following discussions with the Director, a settlement of £38,000 was achieved within 2 months of our appointment.
Mechanical Services
Challenge: Our client was appointed Liquidator of the Company and quickly realised most of the c.£300K ledger would be disputed, due to the failure to complete contracts and contra claims against retentions.
Our challenge was to be able to obtain the documentation required to prove the debt and contest contra claims.
Solution: We attended the company premises before shut down and went through every case file with the director to ensure the necessary contract documentation, applications for payment and payment certificates were held and transferred to our offices. Detailed notes were made in respect of any potential issues on each job.
We worked with the various customers to agree claims and settlements reached.
Result: Initial ledger totalled £300,000 and over the next 14 months to allow for retention periods to expire, we collected a total of £135,000, exceeding the Liquidators estimate to realise.
Drinks Supplier
Challenge: Our client was appointed the Liquidator of the Company and initially, collections were managed in-house. In March 2020, 10 months after their appointment, we were asked to review the non-collectable ledger of c.40 accounts totalling £43,000.
Following our review and reconciliation, we believed further monies were collectable. The majority of the debtors were bars and restaurants who were closed as a result of COVID19.
Solution: We attempted to engage through various communication channels with the debtors, which became more protracted than would usually have been the case. We worked with the debtors to achieve realistic payment plans.
Result: A further £24,000 collected over a period of 6 months, without the need for any court proceedings from a deemed exhausted ledger.
Printing Company
Challenge: Our client was appointed Liquidator of a printing company which had an outstanding debtors’ ledger of £94,000 across 113 accounts.
The top five customers accounted for £74,000 and the remaining 108 averaged just £185 per account. Volumes of accounts with small invoice values always present a challenge with a high workload for little value. Not deterred by the challenge, we set to work.
Solution: We focused the first few days on collecting the 5 main accounts, which after provision of multiple documents were paid in full. We then set to work on the volume accounts as the remaining £20,000 would be key in covering liquidators’ costs and a dividend to creditors.
Result: Against a ledger of £94,000 we achieved a collect out of £93,000 and completed the case within 90 days.
Lighting Maintenance
Challenge: Our client, the Liquidator of the Company, passed us the remaining debtor ledger 8 months after their appointment and exhausted their collections process. With incomplete records and the passage of time, we were tasked with collecting as much as possible for the benefit of the creditors.
Not deterred by the challenge, we set to work.
Solution: We worked methodically through the ledger and sought to establish debts that had already been collected, those that were disputed and those that needed additional information or enquiry.
Certain debts proved tricky and where appropriate we agreed amicable settlements. Other debts were contested and where necessary we prepared these claims for legal proceedings. We dealt with several blue-chip companies and had to keep in regular contact to make sure our debt was made a priority.
Result: Against a ledger of c.£80,000, of which most debts were 12 months or more old we collected a further £35,000 of ‘uncollectable’ debt. A brilliant result which was unexpected by the client.
Antecedent Recoveries
Challenge: Our client was appointed the Liquidator of the Company and instructed My Debt Recovery to collect a small ledger of £20,000 across 80 accounts and to investigate the company trading prior to the Liquidation.
Solution: We reviewed the financial information from SAGE and the bank statements to identify potential claims against the directors of the company. These included preference payments to connected parties and a potential claim for wrongful trading. Following our review, the claims were pursued and an agreement reached for payment by instalments.
Result: £90,000 collected. £80,000 from the claims against the directors and £10,000 from the debtor ledger.
Gaming Industry
Challenge: Our client was appointed Administrator of the Company 6 months prior to our instruction. Two potential debts totalling a maximum £79,000 were pursued in-house but to no avail.
The debtors were based in the BVI and Africa and both debts were disputed for breaches of contract.
Solution: In view of the location of the debtors, legal proceedings were not likely to be a cost effective option. It was therefore imperative that we could engage the debtors in a reasonable dialogue and understanding of the issues.
Result: Following some months of negotiation, we managed to collect £29,000.
Insolvency Case Study – Directors Loan Account
Challenge: Our client was appointed Liquidator of the Company and during their appointment had identified an overdrawn director’s loan account.
Whilst the director had acknowledged the debt and made some payments against the balance, there was still a large balance due to the Liquidation.
Given that the director had stopped making payments and the Liquidator was struggling to contact the director we were engaged to collect the balance.
Solution: We contacted the debtor and advised that the balance needed to be repaid. He advised that he was not able to pay in full and we worked with him to establish what he could afford to pay, and we then agreed to a settlement proposal.
The settlement proposal required him to make substantial monthly payments within a specific time frame.
Result: We were able to collect all monies due under the settlement agreement by managing the account and ensuring all payments were received resulting in collections of £60,000, in addition to the sums previously received by the Liquidator.
Insolvency Case Study – Antecedent Recoveries
Challenge: Our client was appointed Liquidator of the Company following the making of a Winding Up Order. They subsequently appointed My Debt Recovery to assist with the identification of any claims due under the Insolvency Act and to collect any monies due.
The Company was part of a group, and the Liquidator was aware that across the group there had been a lot of connected party transactions that would need to be reviewed such as loan accounts, asset transfers and allocation of trading receipts and payments.
Immediately upon appointment we attended the trading premises to secure all books and records to include computer records.
From here, we undertook a thorough investigation which included restoring and analysing SAGE, reviewing the transactions through the bank account, contacting 3rd parties to obtain information, investigating the movement of assets, and interviewing the directors.
Solution: We identified several claims against the connected parties to include preference payments, overdrawn loan accounts, transactions at undervalue and misfeasance. Following identification of these claims, we formulated a letter of claim to the relevant parties and the matter proceeded to mediation which we attended along with the Liquidator and solicitors.
Result: Reconciliation and collection of an overdrawn loan account totalling £30,000
A full and final settlement of £600,000 against various parties which was payable over 12 months
Agreement of the secured party to surrender all security over the Company assets and not prove in the Liquidation for dividend purposes (with a claim of circa £2m).
Car Dealership & Motor Parts
Challenge: Our client was appointed Administrator of the Company and we were appointed the next day to collect the ledger of c.£114K across 60+ accounts. Our challenge was to pull together incomplete statement information and invoicing, along with dealing with disputes.
Solution: Ledger information was uploaded to our systems, along with copy invoices. We produced statements for each account and issued without delay.
Result: Collections of £104K against the ledger of £114K (£5K already paid and £5K parts not delivered). We achieved a full collect out within 8 weeks of appointment.
Insolvency Case Study – DLA
Challenge: Our client was appointed Liquidator of the Company. We were instructed to investigate
an overdrawn directors loan account.
Solution: My Debt Recovery carried out a full review and were able to reconcile the overdrawn loan account balance as at the date of liquidation as being £34,429. Requests for payment were made and during discussions, it became clear that the director was
facing other claims for payment from creditors.
To protect the Liquidators position, My Debt Recovery obtained judgment then secured a charge against the directors’ property.
Result: Following a sale of the property, in accordance with the Charge £41,349 was realised.
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