Background
Superior Transport Limited (STL) traded a logistics business with two separate branches:
- A general freight business servicing customers throughout Auckland
- A newspaper delivery business for a local newspaper
Collectively, STL employed approximately 20 staff at the date of liquidation and owned several heavy trucks.
Poor financial performance had led to a debt being accrued with Inland Revenue.
Challenges
When liquidating companies that are still trading and employ staff it is essential to form an action plan to mitigate loss and disruption suffered by stakeholders and to maximise recoveries in the liquidation.
A key risk associated with service-based businesses is managing disruption to customers. Customers who experience a loss of service may refuse to pay outstanding invoices as the disruption has cost them money.
We decided to treat the two divisions separately and formed the following action plan:
- Trade the general freight business for a short period of time while facilitating a sale of the business
- Immediately contact the local newspaper to ensure that the newspapers were still delivered while STL was in liquidation and plan the next steps
Result
General freight business
We traded the general freight business division while finalising a sale of the business to a third party. We managed to sell and handover the business within two working days of the liquidation commencing, while continuing the transport routes for the customers of STL.
Because there were no disruptions for customers, we were able to collect 98.88% of outstanding accounts receivable due at the date of liquidation, and ensure a staff member employed by this division was offered employment by the purchaser.
After selling the heavy trucks and collecting accounts receivable we were able to make a full distribution to the finance company and make a partial payment to the staff of STL.
Newspaper delivery business
Upon appointment, we immediately contacted the newspaper business to advise them of the liquidation and liaise with them to ensure the newspapers were still delivered.
We came to an arrangement with the newspaper company; the newspaper company would take over the delivery route, make payments to staff in relation to their outstanding wages owed and employ them directly.
End result
- Both divisions were either sold or handed over to the customer within two working days
- No disruption to customers of the STL
- Employees of STL were offered employment with the new companies
- Full distribution to a secured creditor of STL
- Partial distribution for staff of STL in relation to outstanding wages.
