By Harry Mottram: ICSM has seen a rise in firms that say they are insolvent and lay off their staff and no longer pay suppliers as they have collapsed financially. The workforce is mostly laid off with a small number supposedly there to tie up the loose ends of what business there is left. Except the firm keeps going on the quiet failing to appoint administrators – sometimes working out of the same premises, sometimes relocating to an associated or sister company – and perhaps changing its trading name.
It means that the staff who have been laid off are left in limbo with their redundancy payments unpaid, unsecured creditors left high and dry and even the taxman and secured creditors wondering what the situation is. One recent example of this was reported by Print Week’s Richard Stuart-Turner in the printing industry’s trade publication. Principal Mailing of Northampton ceased trading last year but it took until May of this year to finally appoint administrators leaving the sacked workforce in limbo. And creditors were also left in the lurch.
The Print Week journalist reported: “No information was shared on the reasons for the closure or what had happened to the company’s assets and, when called, Principal Mailing’s listed phone number now states that the number is incorrect.”
He continued: “Principal Mailing Solutions changed its trading name from Mainstream Direct over three years ago.”
He added: “A first Gazette notice for compulsory strike-off was filed for Mainstream Direct Ltd on 23 January 2024 at Companies House, but the compulsory strike-off action was suspended the following day according to another notice.”
Ian Carrotte of ICSM said his members had growing concerns of Ghost Insolvencies which left suppliers and staff in a state on uncertainty. He said: “There is a suspicion by some people that owners are trying wriggle out of their legal commitments such as paying invoices, wages and redundancies. Some people even suggest that it is an attempt to shift the assets of the insolvent firm to a new firm – often highly expensive machinery – so the new company they have already lined up has acquired equipment it wouldn’t normally afford along with dumping debt. It’s a very grey area but with increased business failures it appears to some people some company owners are using Ghost Insolvencies to buy them time to phoenix.”
One conclusion to the practice of Ghost Insolvencies is a compulsory strike off at Companies House where the business is no longer a legal entity usually due to failing to submit accounts. ICSM has in the past seen firms still trading illegally using the name and assets of the struck off company – another example of a Ghost Insolvency – leaving unwitting suppliers and workers in a situation where they are in effect working for the person who commissioned their work. Not only illegal if they are kept in the dark but it means claiming payment is difficult since the business no longer exists.
Eyebrows have been raised this summer over the situation concerning Crystal Press of Hoddeston in Hertfordshire which appears to have ceased trading. However there have been reports from former members of staff that it moved its remaining business to 1066 Capital Limited in Sidcup in Kent. ICSM members have worries over this as the business is believed to have ended in April. However, on September 10th 2024, Companies House published a Compulsory Stike Off notice for 1066 Capital Limited. ICSM have contacted Crystal requesting a clarification.
Ian Carrotte of ICSM said Ghost Insolvencies together with Pre-Packs have been on the rise due to increased financial constraints on industry. He said all the usual reasons for business failures were cited when a firm collapsed from high interest rates and energy costs to a bad Brexit Business deal to Covid. He said: “There is a universal reason for all insolvencies and that is debt. Whether servicing historic debt such as loans or bad debts incurred from customers going bust and leaving a cash flow crisis. The only solution is to stick rigidly to your terms of business and when a client fails to pay on the due date put them on stop. Otherwise, you could be working for nothing.”
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ICSM CREDIT
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ICSM, The Exchange, Express Park, Bristol Road, Bridgwater, Somerset TA6 4RR. Tel: 0844 854 1850. www.icsmcredit.com. Ian.carrotte@icsmcredit.com