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a true sad story (including a Brumark example)

A Company Director in his 50th year had built a Company from scratch to an annual turnover of £5-6M. The Company enjoyed a good reputation for quality and the MD was well known in his industry and sat on various committees in his professional capacity.They say bad luck happens in threes.
  1. Firstly, a large contract the Company had been working on went horribly wrong.
  2. Secondly, a key client that the Company had been dealing with suddenly went into Liquidation owing them £130K. Realistically a Nil realisation is expected from that Insolvency.
  3. Thirdly, right out of the blue another large client is disputing his bill.
In six months the Company has gone from trading comfortably and well, to having a real Cash Flow shortage of £200-£500K.The Bank - which only last year confirmed that it wanted to lend more money to the Company - has gone completely in the other direction and is now talking of lowering the overdraft limit and requiring more security.The Company Director borrows £50K from his pension fund and £100K over many months from his house and Credit Cards to re-invest in the business. He sees some finance consultants and starts to realise - too late - that he went to the wrong people. He ages 5 years in 3 months, because he is not sleeping, and spending his time fire fighting and not running his business.

The effect

He has managed to keep his suppliers' goodwill by constantly updating them until, without warning, a Winding Up Petition is served by a company which is owed only a relatively small amount - but they are then joined by another Creditor. The petition is advertised to go to Court in 4 weeks' time. The Bank find out on the Wednesday, 2 days after the Petition is advertised, and immediately appoint Administrative Receivers under their Debenture. All staff are dismissed on the Thursday morning apart from 6 skeleton staff.

The result

For the Director:

  1. His Income stream is stopped. No salaries are paid into his account. This leaves him with personal problems regarding mortgage, household bills, school fees, and credit cards (increased by his putting money into the Company).
  2. The Bank calls his personal Guarantee. He has always assumed that the Bank's Debenture over book debts will cover the facilities. The Bank advises him of the ruling in 'Brumark' and advises him that as a result of this they may not be paid out in full, or at all.

    Please contact us for more information on how the vitally important Brumark decision could affect you - legally we are waiting for the Spectrum case to be finally resolved.
  3. His financial future is totally bleak as there is no income. Marital problems ensue. (You can deal with many problems if your income stream is protected, this is our strongest area. We can protect your income and your future.)
  4. The Company Liquidator asks for all loans the Director had repaid to himself, family and friends, in respect of money he had lent to the Company over the last two years, to be refunded to the Liquidator due to the preference rules.

    Please contact us for information about preference in liquidation.

What can Banking Liaison Group do?

To avoid the possibility of this happening to you, please contact us for advice.

What might seem like an impossible situation to you is an everyday occurrence to us.

What is vitally important to you, the Company Director, is to get in the driving seat and 'take charge'. If you do not, then somebody else will.

We can help you deal with your bank / finance matters, looking at any potential insolvency Issues. There are many ways to continue trading and re-structure YOUR business. We are here to help you - the Company Director - we are on YOUR side.

We never charge a fee just to meet with you. So talk to us sooner rather than later.


More on insolvency ...

How we can help if insolvency looms

Frequently asked questions about insolvency


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