Liquidation of a Café with a Bounce Back Loan

Background

The Company was incorporated on 2 November 2004 and the business was that of a café in the local area of Urmston. Along with the director, the company employed five other members of staff. The business traded successfully, and this was reflected in the 2019 accounts: illustrating a turnover of £280,000 per annum.

Challenges Faced

All was going well for the company until in March 2020 the World Health Organisation declared Covid-19 to be a global pandemic. Consequently, the company was not able to open for extended periods of time leading to the company’s turnover to drastically decline, and to compound matters even further the liabilities continued to accrue, such as rent, utilities, and leasing costs.

When the company was finally able to open again it only achieved a moderate turnover due to a change in people’s habits and lack of disposable income. The company obtained a Bounce Back Loan in the sum of £50,000 (being 25% of its turnover for 2019 capped at £50,000). The company used the Bounce Back Loan to help cover the ongoing liabilities as the company was unable to make sufficient profit to cover its costs.

Unfortunately, the Bounce Back Loan was not enough to keep the company going and the liabilities mounted along with the creditor pressure. The director knew the company was no longer viable and due to the effects on her mental health no longer wanted to continue with the business.

Insolvency Process

Initiation

The director contacted Parker Walsh and had the initial meeting with Molly Monks, a licensed Insolvency Practitioner. Time was taken to understand the company’s position and the tailored advice given was easy to understand. It was concluded that the company was insolvent as it could not pay its debts as and when they fell due and it was recommended that the company enters into liquidation.

Strategy

Parker Walsh instructed professional agents to sell the assets (coffee machines and other kitchen equipment), which covered the cost of the Liquidation and therefore the director did not have to cover the cost of the liquidation personally. The staff were made redundant, and Parker Walsh assisted the employees in claiming arrears of pay, notice pay, holiday pay and redundancy pay from the Redundancy Payment Service. Parker Walsh notified all the creditors and answered any queries they had.

Recommendations

As soon as a business is no longer viable, consult with a licensed Insolvency Practitioner, such as Molly Monks of Parker Walsh. It is important to obtain bespoke advice that is right for your company from a qualified professional.

If you believe your company may be insolvent, you can take our free quiz.

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