Share this content
0
496

Drowning in court cases cashflow issues

Business is under severe pressure from suppliers regarding unpaid debts

Didn't find your answer?

Search AccountingWEB

I recently took on a role at a Construction firm, given the nature of the business all the money comes in at the end of the project.

The cashflow has not been properly planned and now various suppliers are taking legal action to attempt to recover funds.

Having never experienced this it feels like a cosntant tidal wave of pressure that won't abait. I'm wondering at what point it will all fall apart. as every week seems to be a miracle of straining suppliers.

 

My real question is at the point of being served a windup order, what happens to the directors, is it a case of liquidators managing everything? If the company has no assets how do liquidiators get paid?

Thanks,

Kris

Replies (5)

Please login or register to join the discussion.

avatar
By bernard michael
12th Sep 2019 09:40

The directors have to answer to and assist the liquidator in his investigation of the company's affairs. A formal report is prepared detailing the actions of the directors in running the business and why it ended up in trouble
If the winding up petition is granted by the Court the Insolvency Service will initially be appointed as liquidators

Thanks (0)
avatar
By paul.benny
12th Sep 2019 09:41

What's your role in the company:
Are you No1 in finance?
Are you a director?

What's the take of the directors on this?

Sounds like the company needs advice from an insolvency practitioner.

Thanks (0)
Replying to paul.benny:
avatar
By WhichTyler
12th Sep 2019 10:28

Agree with the last point. the company appears to be insolvent on the basis that it cannot meet its liabilities as the fall due so the directors need to consider if they can legitimately carry on trading.

Tell them to consult an IP pronto (or inject funds...)

Thanks (0)
avatar
By ohwhatnow
12th Sep 2019 11:17

not sure what field of construction the company is in, but i was of the impression that most construction companies, particularly for large/long term projects, arrange staged payments from their client.
This should cover the need to pay for your supplies/sub-contracted services along the way.

Thanks (0)
Replying to ohwhatnow:
Hallerud at Easter
By DJKL
12th Sep 2019 15:32

I would agree in the main but would caveat that sometimes with retentions etc the stage payments cover little more than costs, if even that, so if say all labour and materials are bought in there is a reasonable chance the business is operating on a negative cashflow, and if it has insufficient working capital to start with, or directors/owners paying themselves before cashflow from profits comes in, that can cause issues.

Thanks (0)
Share this content