Joe Bloggs Limited (JB) has suffered a bad debt of £95,000 from the demise of its largest customer and has suffered from a downturn in business as a result of the failure of that customer. JB had 15 employees and has made 5 of those employees redundant. The residual core of the business is profitable but the weight of past debt means that the company cannot strive "as is". The amounts owed to the creditors total £360,000 represented by 34 different creditors.
Two weeks ago, the company directors put forward to creditors a Company Voluntary Arrangement (CVA) proposal offering to pay £5,000 per month for a four year period. At a creditors meeting, the creditors rejected that proposal, as the main creditor (for VAT and PAYE) would not accept anything less than a CVA offering payment in full over a six year period.
As a result of that rejection, Joe (being positively bound to take some form of other insolvency action in respect of the company he owned), further discussed the matter with his insolvency advisor (Fred) and decided that he had little alternative but to resort to a "Plan B". Plan B was for the Oldco to be liquidated and for a "phoenix company" (Newco) to be incorporated.
Joe indicated to Fred that Newco would like to buy the CNC machines from Oldco. Fred countered and advised that if Joe wanted to buy the assets (in a Newco) and use a name similar to "Joe Bloggs Ltd" in the future it was essential to have the proposed deal approved by a further liquidation creditors meeting of the Oldco. Fred said that the first step was to have the assets professionally valued.
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