Maximising the return to creditors in a failing video reproduction business

This business faced financial difficulties due to fixed royalties payable to DVD patent holders, increasing competition from overseas firms and falling demand during the recession. The Directors sought Gore and Company’s help and, after a business review concluded there was no hope of trading out of its indebtedness, were advised to put the company into Administration as soon as possible.

Gore and Company continued running the business through the busy Christmas period in order to satisfy contracts with existing clients. Assets of the business were investigated and subsequently sold. Outstanding finance agreements were settled and outstanding debtors collected leading to the payment of a dividend to creditors.

The Gore and Company business review revealed that costs had increased significantly when the business had attempted to move its production facilities this was mainly due to the business failing to find a buyer for the old premises, the cost of maintaining the old facilities and insufficient power supply which forced them to maintain production at two sites. Accumulated losses forced the company to neglect the servicing of its plant and therefore suffered increased downtime and sub-optimal output. The business was placed into Administration in order to achieve the best possible outcome for creditors. Gore and Company used the administration to continue the trade of the business profitably, to complete orders in place in order to avoid further potential claims and to find a buyer for the business. Although it was not possible to find a buyer for the business, due to the competitive position of trading in this area from outside of the UK, the Administration allowed for an orderly winding up of the business, the delivery of promised services to clients and a surplus of funds to be distributed to clients.

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