A recently filed report for creditors of Oxfordshire based designer and manufacturer of office furniture, Tangent Office Furniture, has revealed that unsecured creditors of the business could lose out on almost £1m.
The £6m turnover company had been struggling following poor market conditions, increased competition and increased overheads. However, suffering a large bad debt of £120,000 was the ‘nail in the coffin’ when one of their major customers entered into formal insolvency proceedings. This left the company struggling with its cash flow commitments and with no further shareholder funds available and unsuccessful attempts to find a trade buyer, the business had no other choice than to appoint administrators in May 2017.
In what’s known as a ‘pre-pack administration’, following their appointment the administrators sold the company to the existing management team for a sum of £30,000. Good news for the 60-strong workforce but no such luck for the unsecured creditors, including trade suppliers, who are now looking at a total loss amount of just under £926,000.
A pre-pack administration is the process of a buyer being identified prior to the administration process, resulting in a quick sale of the assets after the company has entered administration. Often the assets are bought by the previous directors or management to set up the new company. This process is deemed advantageous as a greater amount of the assets can be released and many of the jobs can be saved by just re-employing the staff at the new company. To the general public the appearance is one of continuing to operate but few spare a thought for the trade creditors who have funded the transformation by their loss.
Trade Credit Insurance protects businesses from bad debts caused by the insolvency or default of a business customer, such as the £120,000 debt that Tangent Office Furniture were left with after the insolvency of their key buyer. A policy will also cover the debts arising after a pre-pack administration, even if the company appears to still be trading. As specialist brokers Acumen can arrange bespoke credit insurance policies to suit your business and trade sector so if your business it at risk of being yet another victim of a pre-pack administration, contact us today.