By Michael Turner - Updated on March 11, 2022Placeholder Security provided security services for nightclubs and other commercial venues throughout Auckland.
Our client had a first ranking security interest in the accounts receivable book of Placeholder Security.
Background – receivership of service-based businesses
A key issue associated with the receivership of service-based businesses is mitigating the disruption of service to the customers and other stakeholders of the Company resulting from the receivership.
If customers face disruption to their businesses, they may refuse to pay their outstanding invoices, asserting setoffs.
Potential setoffs can include loss incurred by the customer for being unable to open, or costs associated with sourcing a replacement security Company at short notice.
The assets of Placeholder Security consisted of outstanding invoices issued in respect of security services provided. We determined that there was no value in the business itself as the profitability of the underlying contracts was not optimal.
Actions taken and result achieved
We immediately took action to contact the staff and customers of Placeholder Security with the goal of ensuring security coverage remained in place for the duration of the receivership.
Working with customers and the staff placeholder security, we traded the security business for a short period of time pending the handover of the security contracts to third party providers.
We were able to successfully preserve the value of the accounts receivable to a level which resulted in our appointors debt being paid in full while also facilitating payments to the staff and contractors of Placeholder Security
The result of our efforts was as follows
- Our client’s debt was paid in full
- The employees and security contractors of Placeholder Security received payment in respect of outstanding wages owed at the date of receivership
- The customers of Placeholder Security experienced minimal disruption to their businesses and operations as the receiver was able to maintain security coverage to a satisfactory level.
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