Freight Forwarder Case Study
This international logistics business traded as a freight forwarder, largely within the media and satellite communications sector. Prior to moving to work premises, the firm traded from the director’s London home in Twickenham.
The company had done well for many years, but in 2006, the director lost two major contracts as a result of a change of policy within these organisations. This was a serious blow, and with a family to support, the director realised he would be in more secure employment if he stopped trading and took up a role which was offered by one of his clients. He took the decision while his company was solvent and informed Companies House and the business was deemed dormant.
Restarting the Business
A few years had passed when the director decided he wanted to run his own business again so he restarted the company. He arranged an overdraft facility of £17,000 through the company’s bank which would be used as working capital. This was secured by the director as a personal guarantee and a fixed and floating charge was later created and registered by the bank at Companies House.
Once up and running again, the business gained new clients and trading was relatively successful, until mid 2011, when the company’s main client folded.
This client was in a group that restructured through a management buyout, and although no payments were owed to the company at the time, it announced that under its new ownership, the company would lose the contract.
The director needed to find new sources of income so he brought on a former employee of the now restructured company and felt confident that it would be possible to win business through connections. The company also relocated to a rented business unit in Farnborough, Hampshire.
But business was slow and additional costs impacted negatively on profits, soon, cashflow kicked in. A worsening economic climate also meant more clients breached terms and paid late. The director was forced to fund the business himself to cover overheads.
In total, the director was owed some £25,000 and he also had the personal guarantee to the bank for £35,000. With business failing to grow and no personal funds to put into the firm, the director had to make his employee redundant and cease trading.
Outstanding liabilities now reached over £1500,000 and so the director contacted Company Debt for assistance. It was decided the best way forward was to place the business into Creditors’ Voluntary Liquidation.