A Review Report to advise on avoiding the making of a winding up order
|5A Kernick Industrial Estate|
|J Bloggs Esq|
|Joe Bloggs Ltd|
|22nd June 2010|
Dear Mr Bloggs,
JOE BLOGGS LIMITED (The "Company")
I refer to our meeting held earlier today. In this letter I summarise the various alternatives available to the Company and the option that is recommended.
On the 15th June 2010 the largest Company creditor, to whom the Company owes £50,000, issued a winding up petition against the Company.
That petition is to be heard by the court on the 31st July 2010. If nothing is done before that date it is likely that the court will make a winding up order on the 31st July 2010. The Official Receiver would then be appointed liquidator of the Company and the Company would cease to trade.
Present Financial Position
Schedules are attached which set out:
- a statement of affairs
- schedules of:
- secured creditors and
- preferential creditors and
- unsecured creditors
- integrated forecasts, for the next twelve months of:
- profits and
- cash flow and
- balance sheet movements
- a summary of the Company profit and loss account and balance sheet for the last three years.
You advised me that the Company has been trading profitably for the last few years until a bad debt of £120,000 was experienced in March 2010. The core profitability of the business remains unchanged but the Company cannot pay creditors when due as a result of the cash lost from that bad debt.
The Company needs time to re-arrange its affairs and that time can be arranged by freezing creditor's actions.
1. Doing Nothing
For the sake of completeness I only mention "doing nothing" to show that this is not really an option. If the directors "do nothing" the Company will be lost when a winding up order is made on the 31st July 2010.
2. A Company Voluntary Arrangement (CVA)
It is likely that that creditors would accept a CVA proposal. There is however, insufficient time between now and the 31st July to :
- prepare that proposal
- lodge that document in court
- call a creditors meeting
- hold that creditors meeting to consider the proposal.
As a CVA is the best possible outcome, you need to take a preliminary step to first freeze creditors to allow time for a CVA to be drafted and a creditors meeting held.
Creditors can be frozen in this important period if the Court were to make an Administration Order on your application.
Various procedures must be followed and documents must be lodged at Court for a Judge to consider the granting of an Administration Order.
At our meeting earlier today I handed to you Purnells guide to Administration Orders, which addresses those requirements in detail.
I recommend that a member of my staff attends at your office for a number of days to prepare the necessary paperwork needed to apply for an Administration Order.
At the same time we would commence the preparation of the CVA proposal. That proposal would be finalised and circulated to creditors soon after the granting of the Administration Order.
At our meeting I handed to you a schedule of the charge out rates of each member of the firm who would be engaged in this matter. I estimate total costs at £............ plus VAT.
Should you wish to give Purnells instructions please reply by return email and arrangements will be made for myself and a member of my staff to be at your offices at 9.00am tomorrow morning.
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