Insolvent businesses question - interesting legal point!
Discussion
I'd be very grateful if there are any commercial lawyers on here who might be able to assist me? As will probably become clear, I'm not looking for free legal advice myself - this isn't just being cheap!
For some years, one of my businesses supplied a client. We'll call them Cable for want of anything else. Originally we supplied Cable Ltd. A few years ago, the name assets and business of Cable Ltd were bought by another company; we'll call them Plug Ltd. We transferred our supply contract to Plug Ltd t/a Cable, and all went well.
3 weeks ago, Plug Ltd sold Cable to a new owner on a carve-out basis (assets and business from the larger whole of Plug Ltd). The new owner (we'll call them Drum plc) set up a subsidiary called Cable (UK) Ltd to buy those assets and that business. Drum plc invested money in Cable (UK) Ltd, which in turn bought the business and assets called collectively Cable from Plug Ltd.
Now, our contract with Plug Ltd said that, if they wanted to do this, they had to give us 28 days notice in writing. They gave us no notice - when we first heard about it, they were expecting us to have been unknowingly supplying Cable (UK) Ltd for some days. Our credit insurers wouldn't touch Cable (UK) Ltd or even Drum plc with a bargepole, so we closed down the account - but not before they'd consumed £3.5k of services.
Some of the people who provided the service to Cable from our side wanted to carry on doing so, and we let them. So they - as self-employed individuals - started billing Cable (UK) Ltd. There was no transfer of undertaking, no TUPE stuff, and so on. But they had a meeting with the MD of Drum plc and the MD of Cable who told them it was going to be an exciting time, lots of new investment, etc.
Yesterday, Drum plc's Directors closed down Cable (UK) Ltd - told everybody to leave. Cable (UK) Ltd has ceased trading. They've appointed "consultants" (a firm run by the father of the MD of Drum plc...) to handle affairs. The consultants tell me that there is unlikely to be a dividend for ordinary creditors.
Now, I've still got a contract with Plug Ltd which says they have to give me notice of a change. They didn't give me notice, so I believe I'm fine - I'll just bill Plug Ltd under the contract for the amount I'm owed. They're still solvent
"My guys", however, look to be about to be shafted, and I want to help them out if I can by guiding them through the process.
Because Drum plc is a listed company, there were lots of filings before the deal went through. Those included carve-out accounts for Cable, showing that it had made a loss for 3-4 years, and was clearly dependent upon a generous parent to be viable as a solvent concern.
So, my question is, can Drum plc do this? Can they set up a subsidiary, put money into that subsidiary, have that subsidiary buy the assets and business of a loss-making and clearly (without support) insolvent company, then just close it down 3 weeks later and walk away from the debts accrued in those 3 weeks?
Does the original company (Plug Ltd) retain some responsibility for the business it has sold?
The consultant has told me this evening that Drum plc intended to either "kill or cure" Cable in the first 3-4 weeks of ownership; in fact, they had acquired 3 businesses from Plug Ltd, but only wanted 2 of them - Cable was a required part of the deal from Plug's point of view (if you buy 2, you have to take the 3rd off our hands). He has also told me that Plug Ltd would have shut down the Cable operation itself had it not sold it.
There is also an additional factor: Drum plc raised fresh share capital to fund the purchase of Cable (and the other 2 businesses). The consultant is telling me that they intended to "kill or cure" Cable, yet in the AIM Admission Document they spoke of The Wire being a great investment, a good opportunity, and so on. So are they also guilty of failings under either stock market rules of indeed laws of the land?
Any opinions would be gratefully received. What I'm trying to do is to generate a little ammunition to help "my guys" to get paid by this shower. Right now Cable (UK) Ltd has not sought protection from creditors; it has simply ceased trading. It may be that there is little that can be done, and I'm not looking to debate the morals, but rather trying to work out what leverage can be applied if any.
Alternatively, if anybody can suggest an alternate forum for me to post this question, I'd be very grateful. Thanks!
For some years, one of my businesses supplied a client. We'll call them Cable for want of anything else. Originally we supplied Cable Ltd. A few years ago, the name assets and business of Cable Ltd were bought by another company; we'll call them Plug Ltd. We transferred our supply contract to Plug Ltd t/a Cable, and all went well.
3 weeks ago, Plug Ltd sold Cable to a new owner on a carve-out basis (assets and business from the larger whole of Plug Ltd). The new owner (we'll call them Drum plc) set up a subsidiary called Cable (UK) Ltd to buy those assets and that business. Drum plc invested money in Cable (UK) Ltd, which in turn bought the business and assets called collectively Cable from Plug Ltd.
Now, our contract with Plug Ltd said that, if they wanted to do this, they had to give us 28 days notice in writing. They gave us no notice - when we first heard about it, they were expecting us to have been unknowingly supplying Cable (UK) Ltd for some days. Our credit insurers wouldn't touch Cable (UK) Ltd or even Drum plc with a bargepole, so we closed down the account - but not before they'd consumed £3.5k of services.
Some of the people who provided the service to Cable from our side wanted to carry on doing so, and we let them. So they - as self-employed individuals - started billing Cable (UK) Ltd. There was no transfer of undertaking, no TUPE stuff, and so on. But they had a meeting with the MD of Drum plc and the MD of Cable who told them it was going to be an exciting time, lots of new investment, etc.
Yesterday, Drum plc's Directors closed down Cable (UK) Ltd - told everybody to leave. Cable (UK) Ltd has ceased trading. They've appointed "consultants" (a firm run by the father of the MD of Drum plc...) to handle affairs. The consultants tell me that there is unlikely to be a dividend for ordinary creditors.
Now, I've still got a contract with Plug Ltd which says they have to give me notice of a change. They didn't give me notice, so I believe I'm fine - I'll just bill Plug Ltd under the contract for the amount I'm owed. They're still solvent
"My guys", however, look to be about to be shafted, and I want to help them out if I can by guiding them through the process.
Because Drum plc is a listed company, there were lots of filings before the deal went through. Those included carve-out accounts for Cable, showing that it had made a loss for 3-4 years, and was clearly dependent upon a generous parent to be viable as a solvent concern.
So, my question is, can Drum plc do this? Can they set up a subsidiary, put money into that subsidiary, have that subsidiary buy the assets and business of a loss-making and clearly (without support) insolvent company, then just close it down 3 weeks later and walk away from the debts accrued in those 3 weeks?
Does the original company (Plug Ltd) retain some responsibility for the business it has sold?
The consultant has told me this evening that Drum plc intended to either "kill or cure" Cable in the first 3-4 weeks of ownership; in fact, they had acquired 3 businesses from Plug Ltd, but only wanted 2 of them - Cable was a required part of the deal from Plug's point of view (if you buy 2, you have to take the 3rd off our hands). He has also told me that Plug Ltd would have shut down the Cable operation itself had it not sold it.
There is also an additional factor: Drum plc raised fresh share capital to fund the purchase of Cable (and the other 2 businesses). The consultant is telling me that they intended to "kill or cure" Cable, yet in the AIM Admission Document they spoke of The Wire being a great investment, a good opportunity, and so on. So are they also guilty of failings under either stock market rules of indeed laws of the land?
Any opinions would be gratefully received. What I'm trying to do is to generate a little ammunition to help "my guys" to get paid by this shower. Right now Cable (UK) Ltd has not sought protection from creditors; it has simply ceased trading. It may be that there is little that can be done, and I'm not looking to debate the morals, but rather trying to work out what leverage can be applied if any.
Alternatively, if anybody can suggest an alternate forum for me to post this question, I'd be very grateful. Thanks!
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