Businesses going bankrupt and restarting
Discussion
Rick101 said:
oldnbold said:
If the Ltd Co directors have done nothing legally wrong they can often buy the assets back from the liquidator and open shop under a new Ltd Co.
Are they taking some massive wages or draw down then to be able to buy these assets back? If they are surely isn't that them deliberately running up the debt and causing the problem?Where does the money the company has made/taken go to?
I'm not talking about huge multinationals here either. As a small business expands to other sites its usual to start a seperate company for each site, then if one site has a problem which effects it ability to trade profitably it can be liquidated without effecting the rest of the group.
To anwser your question the money taken is often consumed in operating costs of the business, rents, equipment leases, wages, loan reypayments etc. A business can generally trade for several months even years unprofitably before having to fold.
Rick101 said:
There are some small independent shops near me. Sell niche products, never seem to have anybody in the shop, never seem to do any business. Open, runs for a few months, closes, re opens. I always wonder if it's some sort of money laundering.
See herehttp://www.chad.co.uk/news/crime/sutton-shop-hid-m...
It's a massive problem in the recovery industry atm. Firms tender the lowest possible rate to get huge contracts, which then pushes out smaller operators. They then buy hugely expensive vehicle fleets to do the work, and then when work slows, they can't pay for it.
The firm folds, all the trucks get seized and then the original firm starts again and makes a silly offer to the administators and get most of their equipment back at cut price, enabling them to do exactly the same again! I'm not talking about back street garages but huge companies. So immoral it stinks to any honest business.
The firm folds, all the trucks get seized and then the original firm starts again and makes a silly offer to the administators and get most of their equipment back at cut price, enabling them to do exactly the same again! I'm not talking about back street garages but huge companies. So immoral it stinks to any honest business.
They don't get much bigger than the Phones 4 U "fraud"
2011 Phones4U sold to private equity house BC Partners for £200m. BC then "borrowed" £205m against the company and paid themselves a dividend of £223m, crippling the company with debt and making it hard to meet it's supplier obligations on time. EE & Vodaphone then refuse to renew their contracts with P4U, and DSG make demands for payments on concessions in what could be seen as a syncronised move and force the company into liquidation.
The final result is BC pocket £20m, EE pick up 60 stores for next to nothing from the liquidators, Vodaphone get another 140 for a similar amount, DSG "re-brand" the 160 concessions and between them they carve up the profitable element of the business very nicely thank you, and as a special brucey bonus get hammed up by the media as the "saviours" even though they forced the liquidation in the first place.
HMRC are left out of pocket by £90m in unpaid VAT, NI & PAYE. Over 300 stores close and 1700 jobs lost. Since there is no money left in the pot the redundancy payments, wages and holiday pay for the 1700 will be met by the taxpayer, at an estimated cost of another £10m.
Seems to me the only real loser in the entire scam is the taxpayer. Errrr that'll be you and me then. So why is the economy up s
t creek exactly?
2011 Phones4U sold to private equity house BC Partners for £200m. BC then "borrowed" £205m against the company and paid themselves a dividend of £223m, crippling the company with debt and making it hard to meet it's supplier obligations on time. EE & Vodaphone then refuse to renew their contracts with P4U, and DSG make demands for payments on concessions in what could be seen as a syncronised move and force the company into liquidation.
The final result is BC pocket £20m, EE pick up 60 stores for next to nothing from the liquidators, Vodaphone get another 140 for a similar amount, DSG "re-brand" the 160 concessions and between them they carve up the profitable element of the business very nicely thank you, and as a special brucey bonus get hammed up by the media as the "saviours" even though they forced the liquidation in the first place.
HMRC are left out of pocket by £90m in unpaid VAT, NI & PAYE. Over 300 stores close and 1700 jobs lost. Since there is no money left in the pot the redundancy payments, wages and holiday pay for the 1700 will be met by the taxpayer, at an estimated cost of another £10m.
Seems to me the only real loser in the entire scam is the taxpayer. Errrr that'll be you and me then. So why is the economy up s
t creek exactly?I'd have thought that recovery vehicles would be either leased or a secured debt so a pre-pack wouldn't necessarily be of a huge benefit in either case to getting a 'deal' on them.
Wiping the slate clean with other debts would of course benefit the organisation though.
Insolvency and to an extent the prepack process has it's benefits for the wider economy even if they don't always seem fair (remember fair does not always = efficient) and in nearly all cases it's a better option to actually have a viable business in the first place. It's almost like being given a second go on the coconut shy if you fail at first.
But clearly there are some people who at least seem to abuse the system.
Wiping the slate clean with other debts would of course benefit the organisation though.
Insolvency and to an extent the prepack process has it's benefits for the wider economy even if they don't always seem fair (remember fair does not always = efficient) and in nearly all cases it's a better option to actually have a viable business in the first place. It's almost like being given a second go on the coconut shy if you fail at first.
But clearly there are some people who at least seem to abuse the system.
Edited by rpguk on Tuesday 23 September 16:13
mel said:
They don't get much bigger than the Phones 4 U "fraud"
2011 Phones4U sold to private equity house BC Partners for £200m. BC then "borrowed" £205m against the company and paid themselves a dividend of £223m, crippling the company with debt and making it hard to meet it's supplier obligations on time. EE & Vodaphone then refuse to renew their contracts with P4U, and DSG make demands for payments on concessions in what could be seen as a syncronised move and force the company into liquidation.
The final result is BC pocket £20m, EE pick up 60 stores for next to nothing from the liquidators, Vodaphone get another 140 for a similar amount, DSG "re-brand" the 160 concessions and between them they carve up the profitable element of the business very nicely thank you, and as a special brucey bonus get hammed up by the media as the "saviours" even though they forced the liquidation in the first place.
HMRC are left out of pocket by £90m in unpaid VAT, NI & PAYE. Over 300 stores close and 1700 jobs lost. Since there is no money left in the pot the redundancy payments, wages and holiday pay for the 1700 will be met by the taxpayer, at an estimated cost of another £10m.
Seems to me the only real loser in the entire scam is the taxpayer. Errrr that'll be you and me then. So why is the economy up st creek exactly?
The systems in place which allow this type of thing to occur are also responsible for the exact opposite and have helped other businesses to expand and employ more people and contribute more to the overall economy. 2011 Phones4U sold to private equity house BC Partners for £200m. BC then "borrowed" £205m against the company and paid themselves a dividend of £223m, crippling the company with debt and making it hard to meet it's supplier obligations on time. EE & Vodaphone then refuse to renew their contracts with P4U, and DSG make demands for payments on concessions in what could be seen as a syncronised move and force the company into liquidation.
The final result is BC pocket £20m, EE pick up 60 stores for next to nothing from the liquidators, Vodaphone get another 140 for a similar amount, DSG "re-brand" the 160 concessions and between them they carve up the profitable element of the business very nicely thank you, and as a special brucey bonus get hammed up by the media as the "saviours" even though they forced the liquidation in the first place.
HMRC are left out of pocket by £90m in unpaid VAT, NI & PAYE. Over 300 stores close and 1700 jobs lost. Since there is no money left in the pot the redundancy payments, wages and holiday pay for the 1700 will be met by the taxpayer, at an estimated cost of another £10m.
Seems to me the only real loser in the entire scam is the taxpayer. Errrr that'll be you and me then. So why is the economy up s
t creek exactly?What's to say that Vodaphone and EE wouldn't end up generating more profit and employ more people than Phones4U could have ever achieved, thus making a bigger contribution to society over the longer term?
mel said:
They don't get much bigger than the Phones 4 U "fraud"
2011 Phones4U sold to private equity house BC Partners for £200m. BC then "borrowed" £205m against the company and paid themselves a dividend of £223m, crippling the company with debt and making it hard to meet it's supplier obligations on time.
How did the directors not get disqualified for doing that? Whether P4U folded 3 years after they took the dividend or 3 days, the result was the same.2011 Phones4U sold to private equity house BC Partners for £200m. BC then "borrowed" £205m against the company and paid themselves a dividend of £223m, crippling the company with debt and making it hard to meet it's supplier obligations on time.
What's to stop me taking out a company loan for £2m, taking a large dividend, leaving some money to pay the loan for a year or two and then going bust?
Webber3 said:
What's to stop me taking out a company loan for £2m, taking a large dividend, leaving some money to pay the loan for a year or two and then going bust?
Good question.Answer: Just try doing it. See which banks etc will lend you that kind of money for that purpose. NOT MANY.
Webber3 said:
What's to stop me taking out a company loan for £2m, taking a large dividend, leaving some money to pay the loan for a year or two and then going bust?
For a smaller scale Ltd business it is very difficult to borrow anything without it being secured against an asset. Either first charge on something owned by the compant or via directors personal guarentee. So if the company were liquidated the bank would have ownership of property in lieu of reypayment ahead of all other creditors or would come after and get the directors houses etc.
Rick101 said:
But nothing to stop you setting up a business and selling something like event tickets then just liquidating once you've taken the money?
No nothing to stop you doing that. However when you liquidate a company the liquidater examines the conduct of the directors and if fraudulant activity is evident they are required to report this and criminal charges may follow along with disqualification. They will follow the money trail, don't forget Ltd Co is required to file certified accounts at companies house.
There's a handful of people that I deal with through work that have "gone bust" owing us money & set up doing the same thing under a different name just days/weeks later ... 1 has done it twice on us
I still serve them, but for cash only ... no cheque, no cards, no "I'll bring it round later" ... cash only
If their not happy, tough lol
I still serve them, but for cash only ... no cheque, no cards, no "I'll bring it round later" ... cash only
If their not happy, tough lol
Webber3 said:
What's to stop me taking out a company loan for £2m, taking a large dividend, leaving some money to pay the loan for a year or two and then going bust?
For a start, a loan is a liability, not an asset and you can only pay a dividend based upon a profitable performance in any one period. You can of course take the £2m loan and transfer half into your personal bank account but the full liability remains with the company.To 'deliberately' go bust would require you to knowingly trade whilst insolvent. This is illegal and very difficult to hide. It will be exposed and when it does, the personal protection of limited liability is removed and the directors of the company become personally liability for any shortfall in the company's ability to liquidate its assets to the satisfaction of creditors.
The directors would also be looking at a healthy stretch at Her Majesty's pleasure, the time of which would unlikely be positively influenced by the Ferraris and speedboats that the £1m was used on.
Mind you, you'd have a cracking few months fun!
Rick101 said:
oldnbold said:
If the Ltd Co directors have done nothing legally wrong they can often buy the assets back from the liquidator and open shop under a new Ltd Co.
Are they taking some massive wages or draw down then to be able to buy these assets back? If they are surely isn't that them deliberately running up the debt and causing the problem?Where does the money the company has made/taken go to?
It's a flawed system and unscrupulous people can, and regularly do, use it to take the piss and do many things that are borderline illegal. If you are a dishonest person then you can make a lot of money by abusing the ltd company system and at the expense of others. If you are just discovering this, then it doesn't seem right that people can effectively defraud others without penalty but they can and do.
Fortunately the great majority of people aren't dishonest, and the positives that the system affords is one of the reasons we are such a financially healthy country.
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