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The director of an Essex-based building contractor had gained a good working relationship with another unconnected firm and was offered an opportunity to supply them with labour on an exclusive basis.

A company was formed as the trading vehicle and finance obtained via a small bank overdraft facility, while the business had few physical assets. The company supplied labour for the refurbishment and refitting of major supermarkets.

At first, the business traded relatively well, if on a small scale. Sales of some £300,000 were achieved, with a net profit of around £19,000 in the first trading period to 31 March 2013. The economy was performing well at the time and the amount of work continued to increase – at its peak, the business was employing up to 40 subcontractors.

Losing Battle

However, business did not remain buoyant as the company was affected by payment problems when the main contractor failed to pay a large sum in the region of £135,000. The company fought to keep afloat and maintain the trust of its workers. It managed to meet some costs internally, but this was a losing battle and without cashflow, survival was impossible.

With mounting debts and the main contractor still not paying up, the company was unable to pay its suppliers – added to this  was growing pressure from HMRC. The director had no option but to tell his workers to withdraw their labour. The company stopped trading and now owed more than £122,000 to creditors. The director approached Company Debt and on our advice, the business was placed into Creditors’ Voluntary Liquidation.