Client Gone Into Administration / Taken Over. Various Questions

[Sandy Kominsky]

A client we have been supplying services for has gone into administration owing us about £1200. Their business has been struggling for a while and another company has come in and 'bought them out', setting up a new limited company but keeping the old trading name.

The old company had substantial debts that could not be met. Administrators have been appointed and the new company is already up and trading with most of the old staff retained. We have had no contact from the old company, the new company or the adminstrators.

1. They owe us £1200
We submitted a final invoice back in November. How likely is it that we will see this £1200 either in full or part? What should we do now to ensure that our invoice is not at the bottom of the pile?

2. Contract
The last contract we signed states that either party has to give 12 weeks notice of terminantion of services. There is a section on the contract being breached if we went bankrupt but there is nothing to say what happens if the client went bankrupt / into administration.

Do we have any recourse or is there action that we should be taking because of the lack of contract details about them going into administration?

3. We have some IT equipment belonging to the old company
We were provided with an IP phone and a laptop (together worth around £150). The contract does say that on termination we have to return the items. But noting that the 12 weeks notice has not been issued can we keep this for 12 weeks or longer; effectively making things difficult for them to have the items returned (that's if they wish the items to be returned).

4. It is quite possible that they would require our services again
The new company needs to be up and running as fastly and as smoothly as possible. Some of the staff have left and some say the do not want to do the jobs that we did. It is therefore possible we could be asked to supply services again.

Should we do this? Could we insist that the outstanding invoice from the old company is paid first, or some other kind of recompense is issued before services are supplied again?

Any other advice greatly appreciated.

[cojak]

Don’t do anything before they pay you what they owe you and ignore any promises they make.

Don’t throw good money after bad.

[northernladuk]

A client we have been supplying services for has gone into administration owing us about £1200. Their business has been struggling for a while and another company has come in and 'bought them out', setting up a new limited company but keeping the old trading name.

The old company had substantial debts that could not be met. Administrators have been appointed and the new company is already up and trading with most of the old staff retained. We have had no contact from the old company, the new company or the adminstrators.

1. They owe us £1200
We submitted a final invoice back in November. How likely is it that we will see this £1200 either in full or part? What should we do now to ensure that our invoice is not at the bottom of the pile?

IMO zero chance. No one ever comes out of this situation well. In theory the new company should have bought the old company so they've got a bit of money but often that money sale is for some token amount because the debts and problems outweigh the positives so the company isn't actually worth any money. Homebase got sold for £1 a couple of years ago. If there was something paid to the old company there are much bigger people in the chain than you to get paid so I'd be prepared to write this one off

2. Contract
The last contract we signed states that either party has to give 12 weeks notice of terminantion of services. There is a section on the contract being breached if we went bankrupt but there is nothing to say what happens if the client went bankrupt / into administration.

In theory if there is no clause about them going in to administration then the contract is still valid. That said there will be no company to enforce the terms soon. What are you after asking this? Your work there is done so it doesn't matter what happens now. If you are hoping to get around IP clauses and keep something then no you can't do that as the contract will be still be in force for a period and then the new company will own the IP, kit and so on.

Do we have any recourse or is there action that we should be taking because of the lack of contract details about them going into administration?

To what end? For your 1200 they owe you or some other reason? It's going to get very complex if you wanted to try stop the administration over your contract. Again I'd say this one is dead to you now and you need to be prepared just to move on.

3. We have some IT equipment belonging to the old company
We were provided with an IP phone and a laptop (together worth around £150). The contract does say that on termination we have to return the items. But noting that the 12 weeks notice has not been issued can we keep this for 12 weeks or longer; effectively making things difficult for them to have the items returned (that's if they wish the items to be returned)

Clients kit is clients kit. No issues with contracts ever changes ownership of equipment. If it's not theirs it will belong to the new company. You can't keep it in lieu of payment, that's not how it works. That said this sounds like it's going to be a really messy one and chances are no one is going to even mention it. Personally, sd the kit isn't worth much, I'd be making enquiries in to getting shot of it. Make a decent attempt to contact the right people and keep the evidence. If you make a very poor attempt to give it back if they do come after you it's going to be obvious you were really trying to keep it. For £150 I'd be happy to get shot and move on. Not worth having what is technically stolen kit around the place for that price.

4. It is quite possible that they would require our services again
The new company needs to be up and running as fastly and as smoothly as possible. Some of the staff have left and some say the do not want to do the jobs that we did. It is therefore possible we could be asked to supply services again.

Should we do this? Could we insist that the outstanding invoice from the old company is paid first, or some other kind of recompense is issued before services are supplied again?

I'd say the new company won't have anything to do with the old debts so that's not going to work. The new company can't force the management of the old company, which no longer exist, to pay you money the old company doesn't have.

If they want you on you will need a new contract with the new company and start again. If they need you then up the rate by 10%+ as you have them by the short and curlies and make your 1200 back that way.

The above is probably a load of codswallop and what you really need to do is get in touch with the administrator to find out but for the sake of 1200 quid and some stolen kit I wouldn't be spending much time on it. Get a new contract with the new owners, uplift the right and then whistle all the way to the bank.
Oh... and put very short payment cycles in with the new company. They will either be stripping the old company or will take a bit of time to get up to speed so they may not be too eager to be paying out more money to you so quickly.

[malvolio]

You are in a whole new contract, potentially, assuming you get one; the new company, regardless of name, is nothing to do with the old one. Any kit you are holding now belongs to the administrators as part of the old company's assets, so give it back. YourCo is on the list of unsecured debtors, so that comes after the administrator's fees, HMRC, employee costs and secured debts in that order; the chances of you getting your £1200 are slim, to be honest, but miracles do occur.

As Cojak says, wait to hear from the administrators (chase them up after a decent interval if necessary), but assume the whole relationship and your contract is dead and buried.

[Protagoras]

In these sorry circumstances, does the OP need to terminate the contract formally by giving notice to the Administrators?

[jamesbrown]

You are in a whole new contract, potentially, assuming you get one; the new company, regardless of name, is nothing to do with the old one. Any kit you are holding now belongs to the administrators as part of the old company's assets, so give it back. YourCo is on the list of unsecured debtors, so that comes after the administrator's fees, HMRC, employee costs and secured debts in that order; the chances of you getting your £1200 are slim, to be honest, but miracles do occur.

As Cojak says, wait to hear from the administrators (chase them up after a decent interval if necessary), but assume the whole relationship and your contract is dead and buried.

Nice summary.

[ladymuck]

Do you have IPSE Plus membership?

If the liquidators won't pay up because all the money is gone by the time they get to you then you'd be covered: https://www.ipse.co.uk/become-a-memb...s-Interruption

[Lance]

In these sorry circumstances, does the OP need to terminate the contract formally by giving notice to the Administrators?

it's a bit moot when the client is in breach anyway.

If a formal response is required, then...
- send a copy invoice, and inform them that they are 'on stop' pending settlement of the invoice

[malvolio]

it's a bit moot when the client is in breach anyway.

If a formal response is required, then...
- send a copy invoice, and inform them that they are 'on stop' pending settlement of the invoice

Agreed, but it won't make an ounce of difference. The contract is void so you can't use that as a lever, and the original invoice is in the hands of the administrators in the file marked "unsecured bad debts".

The sensible route is to write off the £1200 and use that to reduce your CT bill. Alt east you get something back.

[Maslins]

Re the "old" company, I'd just wait to see what the administrator does.

It's unlikely you'll see much/any of the £1,200.

On the plus side, I doubt they'll chase you for the IT equipment. If they do, and I were in your shoes, I wouldn't rush to send it back, unless I got most of the £1,200 cash first.

I certainly wouldn't get solicitors/debt collectors involved. If there's no money, you won't get any money, end of. Don't waste more cash trying to chase it.


Re the "new" company, it all depends where the power is, and how significant £1.2k is.

If they need you, and many of the staff there worked with you in the old company, I reckon there's a decent chance they'd agree to pay an extra £1.2k "goodwill gesture" (remember newco won't legally be paying invoice of oldco).

If on the other hand they're not that fussed, or there's dozens of other people/firms who can do what you do, or they want you for just £100 worth of work, it's much less likely they'd agree to compensate for any/all of the oldco amount.