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Jo C.
Jo C., Barrister
Category: Law
Satisfied Customers: 32086
Experience:  Over 5 years in practice
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We are a group of property companies, including property development,

Customer Question

We are a group of property companies, including property development, property Investment and Property management. We used to also have a contracting division.
In 2011 our bankers engineered a default in order to force the sale of our property assets. The matter back fired on the bank as they overstepped the mark and acted illegally, but it affected our contracting company very badly.
In late 2011 we sought refinancing to move away from our bankers and got several offers but these were only partially implemented due to a number of reasons. The board grew concerned in November 2011 that due to the inter-company loans between group companies the group appeared less than straight forward so after much debate the boards of all group companies resolved to have their accountant carry out an exercise to net down the intercompany loans to their lowest denominator.
Where for example; Group Holding Company A (“GHC A”) was owed £500k by Subsidiary Company B, but Subsidiary Company B (“SC B”) was owed £200k by Subsidiary Company C, £50k by subsidiary company D and £25k by Subsidiary Company E.
In this example GHC A would pay off the debts of i.) SC C, ii.) SC D and iii.) SC E and iv.) reduce SC B debt to it by £275k to £225k.
By doing this all debts where ever possible were owed to the holding company by the subsidiary company’s and the number of inter-company debts reduced and were very much easier to follow.
In January 2012 the board met to discuss the work the accountant had been doing on this and agreed that the netting down process should be implemented with immediate effect .
As 2012 progressed, the actions of the groups bankers caused a back log of creditors for the construction company, resulting in considerable creditor pressure.
The Accountant who advised and produced the netting down schedule left the group in the early summer of 2012 and had in any event delegated the actual operation of entering the loan netting down on to sage to a colleague who was part time (having recently had a baby) and who left the group herself shortly after the senior accountant left.
It took several months to recruit a new senior accountant who as one of his first jobs set about making the various entries on to sage to implement the boards January instruction.
The new senior accountant joined the company in September 2012 and completed the entries on to sage in October 2012. Board minutes were produced to confirm the precise amounts and the board’s authority was confirmed.
Meanwhile a Winding up petition was served on the contracting company in August 2012.
The Directors took advice from an Insolvency specialist company who recommended a CVA as a means of the company getting back on its feet. The Court suspended the Winding Up for 56 days to allow the Insolvency practitioner time to put together the CVA.
The Insolvency Practitioners let the building contracting company down badly by failing to put the correct postage on the creditor letters, so most of them were returned to local post office for collection on the payment of the postage shortfall.
Consequently the CVA was not supported to the level required as only about a 1/3 of creditors received the CVA package from the I.P. Company and the Court wound the company up in late November 2012.
The I.P. company who had assisted the contractors and tried to implement the CVA were appointed by the Official Receiver as liquidators.
However within around 4 months of their appointment the I.P. licence holder lost his licence and the company folded as a consequence.
After around a further 12 months a large well know I.P. Company took over the case. We tried to contact them but to no avail. It was around another 12 months before we heard from them with a flood of demands for information.
They were apparently only passed a small amount of paperwork by the previous I.P. Company and/or the official receiver, so they expected in fact demanded that the rest of the group fill in the blanks.
They have recently declared that the net downs of intercompany loans affecting the contracting company are void under section 127 of the 1984 insolvency act and have given various group companies 28 days to pay almost £500,000, which can’t be paid and will sink the entire group.
My auditor, although they are not insolvency specialists say, from an audit point of view that any set of accounts produced after the January date, as that was when the board instructed the netting down, should show the changes implemented and simply because this wasn’t entered on to sage by the accounts staff until after the winding up of the contractor had commenced, shouldn’t be relevant and they don’t believe that section 127 affects the netting down exercise.
What is the position here and what is the trigger for section 127 is it the board instruction or the actual implementation through sage that determines whether or not the netting down is void under section 127?
Submitted: 2 years ago.
Category: Law
Expert:  Nicola-mod replied 2 years ago.
I've been working hard to find a Professional to assist you with your question, but sometimes finding the right Professional can take a little longer than expected.
I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.
Thank you!
Customer: replied 2 years ago.
I guess it's an insolvency lawyer that is needed to answer this point.
I could do with a response early next week.
Expert:  Nicola-mod replied 2 years ago.
We will continue to look for a Professional to assist you.
Thank you for your patience,
Expert:  Nicola-mod replied 2 years ago.
I apologise as we have not yet been able to find a Professional to assist you. Do you wish for me to continue to search for someone to assist you or would you like for us to close your question at this time?
Thank you for your patience,
Customer: replied 2 years ago.
Please repay my money for this question and cancel my membership as the 7 day free trial hasn't met my expectations and as clearly you are unable to answer my question or assist me.Thank you.RegardsAlan Broadway