In 1990 I invested in a new company, Roche Systems Ltd. I provided a loan of £180k as working capital. I also mortgaged to the company a building and plant and machinery. The company did not have the funds available to pay for the assets, the intention was that the company would pay for the assets and repay the loan over a period of time from the profits of the business. To establish and protect my investment in the company a Mortgage Debenture was created in the sum of £399k and I became chairman of the company. I was not however involved in the day to day running of the business because my wife had suffered a stroke and required 24-hour care.
The business of the company was the manufacture and installation of UPVC and aluminium windows and roller shutters.
By 1997 the Company had suffered heavy trading losses, these were compounded through the unscrupulous liquidations of three major customers, whose combined debt amounted to £100k. The company incurred significant costs in fruitless efforts to recover the debts owed to them by these companies. Some key staff members found it too difficult to work within the bounds of the very tight credit control methods that were imposed following the aforementioned bad debts and they left the company.
During 1998 there was no evidence of any improvement in the trading position. Roche’s accountant advised me that the company was in a negative asset situation and advised me to liquidate it. I was concerned by the rate of loss and considered my investment at risk. At the end of July 1998, in line with the conditional terms of my Mortgage Debenture, I took the decision to put the Company into creditors voluntary liquidation and appointed Moores Rowland of Steam Packet House, 76 Cross Street, Manchester M2 4JG to liquidate the Company.
Bearing in mind the difficulties that Roche Systems had already experienced with companies fraudulently going into liquidation, I took care when selecting a liquidator to appoint a reputable company. I had been advised by Mr Stephen Walker, who was the son of a very good friend of mine and whom I knew worked as a Liquidator, that he worked for Moores Rowland. Professional bodies assured me that Moores Rowland was an established and reputable firm. Prior to making the appointment I was advised by Moores Rowland that the cost of liquidation would be £2,500. This also had a bearing on my decision, knowing that the company was in a negative asset situation and having already lost a substantial amount of money, I was anxious to limit any further costs to myself.
During the first week of August I met with Mr Simon Rowe, an employee of Moores Rowland, at the offices of Roche Systems Ltd. I advised Mr Rowe of the size of my loan and the fact that I held a Mortgage Debenture over the assets of the company and a copy of this document was made available to him. I further advised him that the company had no money, that I would pay the liquidator’s fee, the preferential creditors and the bank and, that because I was anxious to keep costs to a minimum I did not wish the liquidator to realise the assets of the company.
Although the trading position of the company was bleak the books and records were properly maintained and audited accounts up to 31st December 1997 were available. The services of the office administrator were retained for one month after the company closed to assist the Liquidator, thereafter, contact telephone numbers were provided.
Mr Rowe advised me that a meeting of members and creditors had been scheduled for 28th August 1998. When I told him that I would be away on holiday on that date and asked if he could change the date Mr Rowe said that it was fixed in accordance with Mr Walker’s schedule. When I asked if someone else from Moores Rowland would be available, he said that it was Mr Walker’s job but that it was not necessary for me to attend the meeting. He did not tell me that Mr Walker was the only licensed insolvency practitioner at Moores Rowland.
In summary, the liquidation should have been a relatively quick and straightforward process.
After the creditors meeting there then occurred a catalogue of abuse and farce.
I have now been corresponding with the ICA for seven months about this matter. It is quite apparent that none of the guide lines that I was seeking exist, which I felt would give weight to my case and put pressure on Mr Walker to wrap the liquidation up promptly. Instead we have entered into a complaints procedure. A procedure that so far has been neither impartial nor effective. A procedure that has allowed the liquidator to hide behind his lack of professionalism and continue to run his clock. It currently takes the ICA 5-6 weeks to respond to each of my letters, they are reluctant to give any credence to what I say, preferring to support Mr Walker in every single aspect. I drew the attention of the ICA to the fact that Mr Walker had signed the Minutes of the creditors’ meeting – they are still awaiting Mr Walker’s explanation! As a direct result of my perseverance they are now suggesting that my complaint may go before an Investigation Committee in April, but they express concern about lack of evidence.
My experience of the ICAEW is that, contrary to what the DTI believe, as a body it is without teeth because there are no established guidelines to enable them to act as regulators. The ICAEW is either reluctant or unable to control the activities of its own members. Consequently insolvency practitioners are allowed to operate freely without regulation at the expense of creditors, employers, local economy – in fact the economy as a whole.
In my particular case, in the early stages of the liquidation I had four opportunities to sell the property/assets. These opportunities would have provided work for local people and generated income for the local economy. Instead as a result of the liquidator’s unnecessary protraction of the liquidation process the building has stood empty, the machinery has been idle and dilapidation has set in. As a consequence everything is worth less than it was 18 months ago.
And why did the liquidator draw it out for so long? In my opinion it was purely to get whatever he could for himself. In order to achieve this he has employed devious means.
I was of the belief the liquidator’s duty is to the creditors;
to see that they are paid up as soon as possible. In his Annual Statement
Mr Walker states :
“The company had created a mortgage debenture and this debenture included a fixed charge on the company’s debts, goodwill and property and a floating charge over the company’s other assets. No distribution has been made by the liquidator to the secured creditor at this stage pending realisation of the other outstanding assets”.
I consider this to be a misrepresentation of the facts, having made it quite clear from day one that I would provide the liquidator with funds to pay the secured creditors. I fail to see the difference between my paying the preferential creditors and the liquidator selling assets in order to pay them other than the unnecessary cost involved and time.
Whilst I have a vested interest in seeing the liquidation of Roche concluded and the costs of this kept to our original agreement, I am not particularly interested in seeing the liquidator disciplined. I am more interested in seeing proper guidelines introduced and the liquidation profession as a whole properly regulated.
I am more than happy to discuss this matter in more detail and provide
any supporting information from the files on this case.