“Dave” and “Andy” were directors of a renewable energy company which had been placed into Creditors Voluntary Liquidation.
The company had previously traded relatively successfully but after changes in government policy which affected subsidies to the consumer market, the company experienced a significant decline in turnover of more than £4M. Despite using turnaround professionals and the directors signing up to additional personal guarantees of £70,000, the company experienced a further downturn in turnover. The directors had no alternative but to take steps to wind up the company.
The liquidation left both Dave and Andy with significant personal liabilities and both also incurred a degree of personal debt attempting to aid the company. Both borrowed money to settle their personal debts including a sum of £15,000 which the factory landlord had demanded to clear arrears of rent before they were prepared to enter negotiations.
Dave and Andy had two main creditors; a personal guarantee to the bank who were owed nearly £158,000 and they were also party to the lease on the factory the company had occupied. Further arrears of rent had accrued totalling £45,000, plus there was future rent of approximately £210,000. This did not include any liability for dilapidations.
Dave and Andy were left facing personal liabilities in excess of £414,000, had insufficient assets to cover these debts and were keen to avoid formal insolvency including bankruptcy and IVAs.
Both directors were able to secure offers of finance using pension funds, as well as with some help from relatives to raise £60,000 each (a total of £120,000) to offer to these two creditors.
The Business Debt Advisor team put together detailed proposals to both the bank and the factory landlord offering them a relevant proportion of the £120,000 which was eventually accepted as a full and final settlement after some level of negotiation.