We were contacted by a glass manufacturer based in Leicester who had rental obligations that they could not meet, during the lockdown period. The Company was tied into a lease with five years still remaining. The future rent and service charges represented a total liability of over £250,000.
The business was still viable with sales approaching 3.2 million in 2019/2020. As with most retail industries, the on-line facility has led to a change in consumer behaviour coupled with the COVID-19 pandemic, which has resulted in some cash flow issues.
The Company had also lost two key members of staff in the last twelve months which had affected their credit control.
The Problem
Without the Company having the means to invest any further funds, the Director could not see any other option but Liquidation. Advice had already been taken but the Director was unsure and wanted a second opinion.
He was referred to us by his bank manager. We reviewed the Company’s financial position and apart from a few issues which could easily be resolved we noted that the Landlord represented by far the biggest creditor. We suggested initial discussion with us and the landlord which although resulted in some personal issues being raised in relation to the arrears of rent, overall, the landlord was positive. The landlord agreed to mediate and protracted correspondence entailed. The landlord was advised of the consequences of liquidation and he too did not wish to go down that route.
Although the Director and Landlord had a rather hostile relationship to begin with, as an independent party we were able to commence negotiations regarding the outstanding rental position as soon as possible and kept the Landlord up dated regularly. Initially, any offers made to the Landlord were rejected and again the Director saw no resolution to the matter and insisted that we took the Liquidation route. The whole situation was causing him undue stress.
However, after several more attempts at negotiating with the Landlord an agreement was reached to an informal surrender of the lease and with no future rent payable, and new terms agreed.
With the rental burden removed, the Company’s balance showed a significant improvement and it was able to continue to trade on-line. Although not fully recovered, the Company’s current assets enabled all other liabilities to be met going forward as and when they fell due.
Liquidation was avoided and it enabled the Director in saving the need to write off a significant sum of money which he had invested in the business. In time these funds will be recovered from the successful trading of the company.
Next Step
If you want to find out anything further about this topic then please feel free to call on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email me vee@navigatebr.com
This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.
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