Insolvent company - help...!!

limklad1974

Hi there
My company has debts which have now mounted to 200,000 euros. Annual revenue is around 100,000 but this is all taken up with paying wages for myself and two other staff, and other expenses such as rent etc...

Basically, I think the company is now insolvent and unable to pay its debts.

The annual revenue is made up of some clients who are paying an annual maintenance fee for a service and they would be interested in hoping we can continue to provide this service.

What are my options?

dbran

Hi

You need to stop trading and seek professional advise from a liquidator.

If the business itself is viable then you may be able to arrange to purchase the business off of the liquidator and set up again via a seperate company.

Kind Regards

dbran

limklad1974

dbran wrote: »

Hi

You need to stop trading and seek professional advise from a liquidator.

If the business itself is viable then you may be able to arrange to purchase the business off of the liquidator and set up again via a seperate company.

Kind Regards

dbran

Am I in danger of being charged with reckless trading?

How often are cases like that taken against poeple in Ireland?

dbran

Hi

You are in danger, however it can be hard for a liquidator to prove as you have to know that he company is insolvent and cannot pay its debts as they fall due. It would need a set of management accounts or a letter from your accountant to be lying around.

Far more dangerous is the concept of preferential creditor where you pay off creditors in preference to others.

Again you need to seek professional advise from an experienced liquidator re the circumstances.

Kind Regards

Dbran

AndyJB

limklad1974 wrote: »

Hi there
My company has debts which have now mounted to 200,000 euros. Annual revenue is around 100,000 but this is all taken up with paying wages for myself and two other staff, and other expenses such as rent etc...

Basically, I think the company is now insolvent and unable to pay its debts.

The annual revenue is made up of some clients who are paying an annual maintenance fee for a service and they would be interested in hoping we can continue to provide this service.

What are my options?

From your post, you are quite obviously under pressure. First of all you should not do anything in haste.

You need to sit down with your accountant and review the company affairs immediately. Look at all areas….

1) VAT returns, are you using “Cash Receipts” or an “Invoice” basis? If you’re not sure your accountant will know. These will have a big effect on your cash flow.

2) Moneys you are owed. Are there customers/clients that owe you money? How much is outstanding and is it collectable? What are you doing to collect money owed to you?

3) Business rent being paid. If your landlord is anyway smart they’ll reduce the rent. What are rental rates like in the area at the moment?

4) Do you owe staff wages?

5) Who/what is owed the 200k? Bank, Revenue and/or general debtors? Are you still servicing this or are you receiving red letters? How much is the 200k costing you to service on a monthly / weekly basis?

6) Staffing, could you function with less staff? Could you run the business with 2 people or on your own for a period? Could you let the staff go but then use them or ANOther on a contract or when needs must basis?

7) Existing Clients, how many are serviceable? What would monthly/quarterly revenues from them be?

The first thing you must do is answer the above questions for starters and then meet the accountant, yesterday. She/he will have some more questions and I would hope suggestions for your issues.

Let us know how you get on.

Best of luck

maxer68

as other have said, it depends on what the 200k is made up of. If 100k is longer term loans and the company is growing and the other 100k is able to be paid off in a reasonable manner, then a bit of tightening is required.

If you are getting letters from revenue, banks not being paid and nobody owes you money and you still owe 200k, then close it asap.

It sounds like you are in a service industry, so it may not be as bad as you've made out.

so if you could -

1. what is the 200k owed made up of (loans, overdraft, taxman, other creditors, personal loans from directors to compnay)

2. are you owed any money from clients, if so, how much

3. The work you are doing, is it on contract and is it guaranteed for next 12 months and is it likely to continue after that?

SimonPRepublic

Great advice from @AndyJB and @Maxer. These kind of helpful swift replies to an urgent request are a credit to Boards.

Just don't panic and keep calm. If you get too stressed you'll make the wrong decisions. From what you've said if you have such a substantial stable revenue then things aren't as bad as they might seem. With a period of readjustment and belt tightening from all quarters you may be OK. I'd hope that any creditor seeing a business with revenue of €100k see the good prospects it has and potential to keep you as a client, so they should be understanding.

By making readjustments to other outgoings you may be able to make savings that you can then put towards a payment plan designed to reduce the €200k debts.

Good luck and let us know how you get on.

antoinolachtnai

Added to all that, think about your fundamentals. Is your business fundamentally profitable? If it isn't then trading out won't be an option.

However, if it isn't profitable you can also consider if there is a way to make it profitable. One option is to cut costs and scale down (I guess you have considered that one.) Another option to do this is to have a competitor take it over. Their larger scale may make it profitable.

If you do a deal with a competitor, they will take over some or all of the debts. The other debts, you might be able to get the creditors to write off.

The one other piece of advice I would give you is to move quickly with whatever you do. The longer you wait, the tougher it will be. Get the professional advice you need.

limklad1974

maxer68 wrote: »

as other have said, it depends on what the 200k is made up of. If 100k is longer term loans and the company is growing and the other 100k is able to be paid off in a reasonable manner, then a bit of tightening is required.

If you are getting letters from revenue, banks not being paid and nobody owes you money and you still owe 200k, then close it asap.

It sounds like you are in a service industry, so it may not be as bad as you've made out.

so if you could -

1. what is the 200k owed made up of (loans, overdraft, taxman, other creditors, personal loans from directors to compnay)

2. are you owed any money from clients, if so, how much

3. The work you are doing, is it on contract and is it guaranteed for next 12 months and is it likely to continue after that?

The debts are 1/3 made up of revenue, with 1/4 due to a company we developed our system with (they are due a commission on sales), 1/6 made up of unpaid wages and the rest is a combination of smaller bills...

We owe nothing to the bank and have already had the sherrif in to arrange a payment scheme for the revenue, which we stuck to for a while but have since lapsed as we dont have the funds to pay the agreed monthly amount

We are a software company providing a service and are owed some money, but maybe only 10 grand max. The revenue of 100K per year should remain in place for next year.....

maxer68

limklad1974 wrote: »

The debts are 1/3 made up of revenue, with 1/4 due to a company we developed our system with (they are due a commission on sales), 1/6 made up of unpaid wages and the rest is a combination of smaller bills...

We owe nothing to the bank and have already had the sherrif in to arrange a payment scheme for the revenue, which we stuck to for a while but have since lapsed as we dont have the funds to pay the agreed monthly amount

We are a software company providing a service and are owed some money, but maybe only 10 grand max. The revenue of 100K per year should remain in place for next year.....

OK - so 50k to a related party and that's dependent on sales, 70k to revenue and they have accepted a payplan that is not being met. 30k in unpaid wages (not good sign)

What I would do (the is not professional advice or anythig of its sort) is chat to the guys that developed the software, see if you can become an agent for them and if so just liquidate the company.

I can't see anything reckless in the pattern, but it does look like you are insolvent, unless you can say that the software is worth €200,000
.

dbran

Hi

How come you owe nothing to the bank. Did you have any loans out that you had personally guaranteed that have since been repaid.

Regards

dbran

limklad1974

maxer68 wrote: »

OK - so 50k to a related party and that's dependent on sales, 70k to revenue and they have accepted a payplan that is not being met. 30k in unpaid wages (not good sign)

What I would do (the is not professional advice or anythig of its sort) is chat to the guys that developed the software, see if you can become an agent for them and if so just liquidate the company.

I can't see anything reckless in the pattern, but it does look like you are insolvent, unless you can say that the software is worth €200,000
.

sorry, maybe I wasnt clear....
The 50k to the related company is already due... we made sales, they were due a commission, we never paid em....!

We developed the software, not them, they advised us what kind of product to build and they were the initial client, so unfortunately us becoming an agent for them isnt an option.

drunkmonkey

The 100k revenue your receiving every year is that straight profit or is there is cost in supplying that?

If your guaranteed 100k a year and it's mostly profit your not in a bad position as the debt pile should be able to be cleared off within the next 2 years if you bring on a little more business to go with it. I'd talk to the people you owe money to and explain the situation and make a payment plan with them as you do have an income. Your going to have to strip the business to the bone to get on top of it but it sounds doable if that is 100k profit a year.

limklad1974

drunkmonkey wrote: »

The 100k revenue your receiving every year is that straight profit or is there is cost in supplying that?

If your guaranteed 100k a year and it's mostly profit your not in a bad position as the debt pile should be able to be cleared off within the next 2 years if you bring on a little more business to go with it. I'd talk to the people you owe money to and explain the situation and make a payment plan with them as you do have an income. Your going to have to strip the business to the bone to get on top of it but it sounds doable if that is 100k profit a year.

Unfortunately, very little of the 100k revenue at the moment is profit. With my salary and wages for two other staff, that money disappears very quickly. I take as little out of the business as possible and may be able to survive if I put the staff on 2 or 3 day weeks... this would mean maybe 40/50k of revenue could be saved as profit

dbran

limklad1974 wrote: »

Unfortunately, very little of the 100k revenue at the moment is profit. With my salary and wages for two other staff, that money disappears very quickly. I take as little out of the business as possible and may be able to survive if I put the staff on 2 or 3 day weeks... this would mean maybe 40/50k of revenue could be saved as profit

But if you stripped the costs to the bone it could be viable and trade out of its difficulties within 3-4 years. Also if you can get the creditors to agree to a restructuring agreement that is agreed by 3/4 of the creditors by number and amount then it is binding on all of the creditors. This could be in the form of an agreed debt reduction, debt being paid over a longer period etc.

Note that the revenue cannot take a debt reduction by law so you will need to deal with them seperately.

Regards

dbran

scwazrh

Removed as it was an incorrect statement

antoinolachtnai

Where have you heard this?