Reply to: Parasol Sold up for £24million

[Tinkerbel]

Simon

I'm pretty sure Ascot Drummond were backed by VC's, whatever happened to them?

Robot

Ascot Drummond are still there. Worked there for 5 years through the excitement of the administration until the end of last year then moved on to pastures new.

[tim123]

If any business goes wrong then the creditors are prioritised e.g. banks always come high up the list. You can bet your bottom dollar the VC people will be high up too. So to answer your question "If it does all go wrong would the contractors still get their money?" the answer is "only after all those with higher priorities are paid first" (which is basically "no, they won't get their money")

The banks are only high up if their money is secured. Otherwise they are the same as anybody else.

The VC people are shareholders. They are last on the list.

tim

[Xtrain]

VC's will have interest bearing debentures no doubt whilst banks are always secured creditors. VC's normally cause the winding up of a failing venture as they always bail out first, they are not interested in just keeping companies alive as they invest on a "double their money in 3 years" basis.

The problem here of course is most umbrellas operate on a minimum wage plus bonus/commission and expenses basis so the true value of salary that would have to be coughed up to the employee creditors would be at the minimum wage level. And no doubt the small print will not guarantee the other bits.

[ASB]

I don't understand this Malvolio. If they owe £20 million then if everything does go to pot they will still owe £20 million and will have to find the money or go bankrupt. They may have loads of cash in the bank but surely that is owed to the IR and the VAT office as well as the contractors and I can't imagine Hector waiting at the back of the queue. I don't know much about all this but once the bank or VCs and the IR and the VAT man have been paid I can't see that there will be much left for the contractors.

It's the order.

1) Debenture Holders in full
2) If anything left secured creditors in full
3) If anything left Employee wages (up to 4 months) and redundancy in full.

I am not entirely sure about the order of 1-3 which is what I was asking Malvolio and how I beleive he replied.

Once this has been done, if there is anything left it is paid amongst the proved ordinary creditors. These now include HMCR.

Hector waits at the back of the queus like all ordinary creditors now. Until the reform of the insolvency act they got in first.

A side effect of this is that Hector is now MUCH keener to launch insolvency proceedings when they are owed money.

[John Galt]

They don't invoice Parasol, they merely submit a record of time worked. Parasol invoices the end client, sorts all the PAYE/NIC/VAT payments and pays them nett, which is why I say they are employees. And as employees, they sit where I said, behind the people that own the money and ahead of any commercial debtors.

If they were a composite or a managed company, however, they would be down at the end with the bailiffs and the unsecured creditors.

I don't understand this Malvolio. If they owe £20 million then if everything does go to pot they will still owe £20 million and will have to find the money or go bankrupt. They may have loads of cash in the bank but surely that is owed to the IR and the VAT office as well as the contractors and I can't imagine Hector waiting at the back of the queue. I don't know much about all this but once the bank or VCs and the IR and the VAT man have been paid I can't see that there will be much left for the contractors.

[malvolio]

They don't invoice Parasol, they merely submit a record of time worked. Parasol invoices the end client, sorts all the PAYE/NIC/VAT payments and pays them nett, which is why I say they are employees. And as employees, they sit where I said, behind the people that own the money and ahead of any commercial debtors.

If they were a composite or a managed company, however, they would be down at the end with the bailiffs and the unsecured creditors.

[ASB]

They are de facto employees (which is why IR35 doesn't apply, remember) so they are head of the queue after the people that actually own the money (i.e. the banks and/or VCs). And don't confuse profit with turnover - I suspect there's a lot more than £24m sitting in their bank account at any given moment.

Parasol ought to be quite safe, in reality - there are a lot worse ways to risk your income out there!

You're probably quite right. But will a submitted and unpaid invoice be accepted as outstanding wages? If not then you're just going to be an unsecured creditor - like HMCR or IR now.

However what I don't know is where unpaid employee wages fit in in the order of preferred creditors. If they are after debentures and secured loans then I guess that is still fairly vulnuerable shoud ones umbrella fail.

[Pondlife]

But the large amounts of cash in their accounts is money that has been invoiced on behalf of, and is owed to, their 'employees' and should not be used to service the massive debt.

Surely it's a case of - if their margin doesn't cover the debt payments owed then they will have to dip into the wages fund to stay afloat. Like you say, paying the Bank/VCs comes before employees.

Or have I misunderstood (again)?

[malvolio]

They are de facto employees (which is why IR35 doesn't apply, remember) so they are head of the queue after the people that actually own the money (i.e. the banks and/or VCs). And don't confuse profit with turnover - I suspect there's a lot more than £24m sitting in their bank account at any given moment.

Parasol ought to be quite safe, in reality - there are a lot worse ways to risk your income out there!

[ASB]

If it does all go wrong would the contractors still get their money?

Personally I feel that this sort of operation should have to account for these transaction as individual client accounts - in pretty much the same way as solicitors, accountants and estate agents. However it is certainly not compulsory and I don't even know if it is possible.

If the contractors are just suppliers, and therefore general creditors it is likely they who will be financing any failure.

If the contractors are employees paid by PAYE then they should at least get a good way further up the queue.

[Mailman]

I am surprised that the PCG didn't buy it!!

Who said that no one can be impartial?

Yeah well if their investment nouse (how ever you spell that word, rhymes with mouse) is as good as their legal advise then they are f8cked!

Mailman

[Xtrain]

Parasol?

I may be being thick here but how can a company that has a profit of about £1 million get a loan for £20 million - surely the repayments would wipe out most of the profit wouldn't it?? If it does all go wrong would the contractors still get their money?

If any business goes wrong then the creditors are prioritised e.g. banks always come high up the list. You can bet your bottom dollar the VC people will be high up too. So to answer your question "If it does all go wrong would the contractors still get their money?" the answer is "only after all those with higher priorities are paid first" (which is basically "no, they won't get their money")

[John Galt]

I may be being thick here but how can a company that has a profit of about £1 million get a loan for £20 million - surely the repayments would wipe out most of the profit wouldn't it?? If it does all go wrong would the contractors still get their money?

[Xtrain]

Sold?

Parasol haven't really been sold, there has just been a mgt buy out by the current MD backed via a VC.

On normal VC backed deals the person staying in has to put all or some of his money back into the new business. So presuming that the MD had £4M worth then Parasol now have a debt of £20M which will be split between the VC and the bank (both of whom come before all other creditors should it all go wrong).

This isn't a £24M investment in the company as Parasol are suggesting....its just a change of ownership. So now a VC company has control over everything with presumably the old MD still fronting it. The only difference is they now owe £20M!! Good luck to all brolly lovers on this one....

[tim123]

The VC's don't normally get it wrong (although when they do it can be spectacularly wrong) so I rather suspect there are other aspects that we don;t know about.

AIUI VCs work on the basis that 2 in 3 of their ventures will fail. This is why they look for large gains form the ones that do succeed. Selling to a VC is not the way to go if you can get a bank to loan you the money.

tim