I was appointed liquidator of the Company at a creditors' meeting of the Company held at the Stillorgan Park Hotel, Stillorgan on 27 April 2009.
I set out below the Statement of Affairs which was presented to the creditors meeting. Creditors should note that it is the directors responsibility to prepare and present the Statement of Affairs.
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DIRECTORS STATEMENT OF AFFAIRS AS AT 27TH APRIL 2009 |
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| BOOK VALUE | | ESTIMATED |
| | | REALISABLE VALUE |
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| € | | € |
Leasehold Improvements | 513,337.00 |
| 75,000.00 |
Fixtures & Equipment | 277,586.00 |
| - |
Computer Equipment | 49,495.00 |
| 5,000.00 |
Stocks | 150,000.00 |
| 100,000.00 |
Trade Debtors | 13,000.00 |
| 13,000.00 |
Supplier Prepayments | 109,100.00 |
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Amount Available for Preferential Creditors | 1,112,518.00 |
| 193,000.00 |
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Preferential Creditors |
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VAT | 380,735.00 |
| 380,735.00 |
PAYE/PRSI | 300,794.00 |
| 300,794.00 |
Employees | 114,328.61 |
| 114,328.61 |
DLRD-Rates 2008 & 2009 | 134,578.62 |
| 134,578.62 |
SDCC, Rates 2009 | 31,089.40 |
| 31,089.40 |
Fingal Co Council, Rates 2009 | 17,753.60 |
| 17,753.60 |
TOTAL | 979,279.23 |
| 979,279.23 |
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Surplus/(Deficit) | 133,238.77 |
| - (786,279.23) |
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Bank of Scotland Ireland-Floating Charge | 275,695.07 |
| 275,695.07 |
Surplus/(Deficit) | - 142,456.30 |
| - (1,061,974.30) |
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Unsecured Creditors |
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Trade Creditors | 942,682.87 |
| 942,682.87 |
Customer Deposits | 1,004,324.99 |
| 1,004,324.99 |
Other Creditors | 310,594.13 |
| 310,594.13 |
Total | 2,257,301.99 |
| 2,257,301.99 |
DEFICIENCY | (2,399,758.29) | | (3,319,276.29) |
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I will be holding the final meeting of creditors at the Stillorgan Park Hotel on 22 July 2010. I will be posting out formal notices of the creditors meeting to creditors in late June 2010.The final meeting of creditors is a formality, and there is no necessity for creditors to attend the creditors meeting itself. I set our below, for the benefit of creditors, a detailed report on the liquidation itself.
Company Background
The Company was incorporated on 10 April 2001. The Company’s Directors were Jim Langan and Liam Walsh. Mr. Langan held 99% of the shareholding, and Mr. Walsh held the remaining 1%. The Company was involved in the retail supply of furniture and had its registered office at Unit 10, Liffey Valley Retail Park, Dublin 22.
Over the years the business began to develop significantly increasing turnover and profitability, yielding a peak profit of €475,000 for the year ended 30th April 2005. However, the addition of the Carrickmines store in 2005, which had very expensive leasing obligations, was a major factor in the company yielding losses for the years ended 2006 & 2007 of €426,000 and €83,000 respectively.
The company sourced 70% of its product from the Far East and trading terms required deposits of up to 20% at the time of placing orders with the balance being due upon the shipping docking in Dublin. As the company’s normal trading terms required a deposit of at least 50% from customers, the Company’s working capital management was workable in a good trading environment.
Trading in 2008, while down in comparison to 2007, was reasonable up to the end of September, with management accounts showing a loss of approx €80,000. In the last quarter constraints on cash flow began to emerge as credit terms from suppliers were severely curtailed due to the credit crunch. In October 2008, the company had discussions with its bankers regarding an increase in the working capital facility which was not granted. A number of “warehouse clearance sales” were held to sell slow moving stock and release cash from stock. During the last quarter of 2008 the company held talks with major creditors, including its landlord and the Revenue, to facilitate a payment plan to tie in with projected cash flows.
An external sales management consultancy was engaged in the first quarter of 2009 which yielded an improvement. In January 2009 two sales staff were made redundant, staff took wage cuts, management took wage cuts and some warehouse staff took a three day week. Further discussions with the banks in 2009 were unsuccessful which meant that containers arriving in Dublin Port could not be paid for.
The company ceased trading on 3 March 2009.
Leased Assets
I had my auctioneer value all of the assets, and I obtained a lease settlement from AIB for the only finance lease, on a mezzanine floor, held by the company to determine if there was any equity in it for the company. The mezzanine floor had been installed in the Company’s warehouse at Rosemount Business Park. Based on the offers received for the mezzanine it was determined that there was equity to be sold on behalf of the Company. I therefore agreed to sell the mezzanine floor and two electric forklifts for €25,000 plus VAT. The lease settlement due to AIB was €9,090, which I paid. However, the landlord changed the locks, without my consent, preventing me from gaining access to the warehouse and removing the floor. The landlord maintained that the mezzanine flooring was a fixture of the building and that it could not be removed. I issued High Court Proceedings against the landlord, and I finally settled the matter on the basis that I do not pay any rent for my use of the premises(approx €20,000),and the landlord paid me €10,000 for the mezzanine floor and the landlord allowed me to collect two electric forklifts which I sold.
Leasehold Improvements
Leasehold improvements were shown on the Statement of Affairs as €513,337 with an estimated realisable value of €75,000. The Company’s estimated realisable leasehold values for the Liffey Valley and Carrickmines shops were nil, although I managed to secure a settlement of €12,500 for the surrender of the Carrickmines lease.
Fixtures & Fittings
Fixtures and fittings are shown on the Statement of Affairs as €277,586 with an estimated realisable value of nil. There was no value in any of the fixtures and fittings other than a lift in the Carrickmines shop that I sold for €10,000 plus VAT.
Computer equipment is shown on the Statement of Affairs as €49,495 with an estimated realisable value of €5,000. I am retaining the server and one of the computers as they contain information which I may need to answer future enquiries
Stock
The Statement of Affairs showed stock with a book value of €150,000 with an estimated realisable value of €100,000. These amounts did not take into account the possibility of Retention of Title claims to be made by creditors.
Upon my appointment as Liquidator I wrote to all known Creditors inviting retention of title claims. I retained a number of warehouse staff to assist me. My staff visited the company warehouse and processed creditors’ retention of title clauses. A number of Creditors exercised Retention of Title but most of the larger suppliers had removed their stock prior to my appointment, at the invitation of Jim Langan. After processing Retention of Title there was still a significant amount of stock remaining.
After all Retention of Title claims had been processed my staff carried out a comprehensive stocktake and searched the company’s computer stock system to identify any stock that could fully, or even partially, complete the orders of customers that had paid fully or paid deposits for furniture. These customers were then contacted and informed that some or all of their order was available for collection or in situations where only deposits were paid the balance had to be paid or else only the value of stock paid was supplied. I was able to supply stock of approximately €65,000 to customers who had paid deposits. I collected €10,254 net of vat in additional payments from 32 of these customers for the collection of additional stock.
Following this process I proceeded to sell the remaining stock, I realised €66,786 net of VAT for the remaining warehouse stock. I instructed Wilson’s Auctions to collect all remaining stock from the two retail outlets and to sell this stock by public auction. This auction was advertised and was held at Wilson’s premises at Kingswood Cross, Dublin 22 on Saturday 30 May 2009. I realised €36,756 net of VAT through the public auction.
Debtors
I obtained from the books and records the backup to the debtor balance which agreed to the director’s Statement of Affairs. The company’s debtors shown on the Statement of affairs were estimated to realise €13,000, and I collected €17,197
Creditors & Employees
The Statement of affairs showed employees claims of €114,329.
I made an application to the Department of Enterprise, Trade and Employment for monies to pay the employee entitlements. I received €38,771.56 from the Department for all claims of arrears of wages, holiday pay and minimum notice compensation. I have paid these funds out to the employees, net of PAYE and PRSI. I forwarded the PAYE and PRSI to the Revenue. The Department paid redundancy lump sums to the value of €29,769.74.
I submitted the outstanding P35 for 2009. The final balance due on the P35 for 2009 was €130,072. Revenue are owed a further €298,164.04 in relation to PAYE/PRSI, €380,735 for VAT, €31,739.12 for Corporation Tax and €49,953.20 for Dividend Withholding Tax.
Reasons for Collapse
There are several factors which led to the Company being placed into liquidation. The collapse of the company can be attributed to a combination of insufficient retention of profits in prior years, which was exacerbated by insufficient working capital when the economy experienced a downturn, combined with the high rental costs of the Carrickmines store.
The Company attempted to obtain additional funding from its bankers which it was intended would be used to acquire stock and be used as working capital.
The problems the company was experiencing in this regard were exacerbated by the slowdown in the construction sector. Increased difficulty caused by suppliers renegotiating existing contracts further tightened the Company’s margins and made it increasingly difficult for the Company to be competitive and ultimately survive.
Depositors
A particular feature of this liquidation was the number and value of claims by customers who paid deposits (i.e. just over 2,000 customers had paid deposits of €1m). The Company’s business model, like that of many of its competitors in the same area, called for customers to pay deposits. The Company’s balance sheet at 31 December 2008 showed deposits of €633,728. The balance sheet at 31 December 2007 showed deposits of €375,454. In early 2009, because of difficulties obtaining supplies, the company failed to deliver as quickly to customers, which meant that depositors’ claims increased.
Report to ODCE
I submitted my section 56 report to ODCE and as I was not relieved by ODCE from the obligation to proceed with a Section 150 against Mr. Langan. I instructed my solicitors to issue such an application. Mr. Langan did not defend the application, and he was restricted by order of the High Court on 15TH February 2010.
Receipts & Payments Account
I set out below a summary of my Receipts & Payments Account for the period of the liquidation.
Receipts | | | |
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Cash At Bank | | | 143.38 |
Sale of Stock | | | 113,105.20 |
Debtors | | | 17,197.00 |
Sale of Mezzanine Floor | | | 8,264.66 |
Sale of Equipment | | | 3,218.50 |
Dept. Of Ent. Trade & Employment - Employees Claims | | 38,771.56 |
Sale of Lift | | | 10,000.00 |
Surrender of Carrickmines Lease | | | 12,500.00 |
Net VAT | | | 6,059.26 |
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| | | 209,259.56 |
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Payments | | | |
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Liquidators Remuneration | | | 128,480.61 |
Employee Claims | | | 38,771.60 |
Legal Expenses | | | 10,703.00 |
Insurance | | | 1,662.60 |
Wages & Salaries | | | 6,472.03 |
Liquidation Expenses | | | 4,626.15 |
Advertising | | | 692.00 |
Auctioneers Fees | | | 8,321.78 |
Lease Settlement | | | 9,089.79 |
Accountants Fees | | | 440.00 |
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| | | 209,259.56 |
There is no prospect of a Dividend in this liquidation for any class of creditor.
Liquidator's Remuneration
My fees on a time cost basis for the liquidation will amount to approximately €141,000. I received sanction from the Committee of Inspection to draw down fees on a time cost basis. My actual recovery of fees will be somewhat less, at €128,481.
Any Further Queries?
If any creditors have any further queries on the liquidation of the company they should write to John McGinty of my staff at the following addresses:
Friel Stafford Corporate Recovery
44 Fitzwilliam Place
Dublin 2
Email: mcginty@liquidation.ie
Jim Stafford
Liquidator
Jim Langan Furniture Value Limited
24 May 2010