Claiming damages against company in liquidation

[Pistom]

A friends company was supplied about £50K of materials by an outfit last year and the materials have proved to be faulty and not to the specification the supplier documented it was. The products made from the materials have all failed due to the material being rubbish.

His company put in a formal complaint. fter processing of the material, the total loss for his firm is more like £100K.

Within weeks of the complaint going in he's found out that the firm has gone into liquidation.

What course is open to him to try to claim his loss back?

Would any insurance the wrongdoing company had in place cover compensationg for such losses or is he up a creek?

Are there any options available to him?

[Robertb]

It’s not inconceivable there is professional indemnity insurance.

Worth speaking to a solicitor and the company’s administrator and making the position known to them.

[Tyrell Corp]

After liquidation, the official receiver will dole out proceeds to creditors, just a small % of what is owed, often just a few pence per pound...and that is after their fees and 'preferential creditor's' such as inland revenue.

Lawyers have a saying: don't sue the man wearing a straw hat.

My point being, apart from the technicalities of litigating against a bankrupt company, if there is no money left anyway then any court actions is just more money down the drain.

If a director folded the company and has squirreled assets out beforehand then that is a different matter.

[Pistom]

I suspect his only hope is if there was any insurance in place on behalf of the supplying company at the time of supply.

The supplier has done a real moonlight flit.

They were originally trading as for example Trotters Trading Limited, went into liquidation and the liquidators sold the assets and business to Trotters Traders Limited (that's not the real name so apologies to any firms sounding similar) which were owned by the same directors.

[Simpo Two]

Pistom said:

They were originally trading as for example Trotters Trading Limited, went into liquidation and the liquidators sold the assets and business to Trotters Traders Limited (that's not the real name so apologies to any firms sounding similar) which were owned by the same directors.

I find it quite astonishing that that kind of stunt is still allowed. How can 'directors' leave a trail of destruction and creditors behind them, company after company, either through greed or ineptitude? You'd think somebody at Companies House would say 'Stop'.

[Pistom]

Simpo Two said:

I find it quite astonishing that that kind of stunt is still allowed. How can 'directors' leave a trail of destruction and creditors behind them, company after company, either through greed or ineptitude? You'd think somebody at Companies House would say 'Stop'.

I believe they're in the same building, the same staff, the same products and trade names, same website. Even the exact same company logo.

The new company paid off all the old companies bad debts so even the suppliers are supplying them.

[2 GKC]

Robertb said:

It’s not inconceivable there is professional indemnity insurance.

Worth speaking to a solicitor and the company’s administrator and making the position known to them.

PI wouldn’t cover it even if they did have it.

[StevieBee]

Pistom said:

The new company paid off all the old companies bad debts so even the suppliers are supplying them.

Which begs the question why they liquidated the old company..... and possibly how they were allowed to.

[Pistom]

StevieBee said:

Pistom said:

The new company paid off all the old companies bad debts so even the suppliers are supplying them.

Which begs the question why they liquidated the old company..... and possibly how they were allowed to.

I suspect they liquidated as they realised they were going to be getting a lot of people like my mate chasing after them.

In his case, it seems an open and shut case. They said they were supplying materials to a spec and once analysed, the material isn't to spec. His claim is into 6 figures.

Looking at the insolvency info on companies house - they owed about £30m but not to their regular suppliers.

[Wings]

That was once a Cornwall property development company, that on the start up of any building development, they would start up a corporate/limited company (250+). Once the building development was completed, the limited company would be dissolved. This was to avoid liability of any possible later claims against the company.

Quite shocking how easy the UK allows businesses to incorporate, together with the huge percentage are allowed to easily dissolve.

[N111BJG]

Wings said:

That was once a Cornwall property development company, that on the start up of any building development, they would start up a corporate/limited company (250+). Once the building development was completed, the limited company would be dissolved. This was to avoid liability of any possible later claims against the company.

Quite shocking how easy the UK allows businesses to incorporate, together with the huge percentage are allowed to easily dissolve.

Housebuilders / property developers are often SPV’s, Single Purpose Ventures. (Other words fitting the same or similar acronym are also used). They are created with the very intention of grabbing the profit & escaping the threat of future liabilities. The existence of NHBC & other similar warranties are supposed to mean that home owners are not disadvantaged by this happening, not the reality of the situation of course.

[Panamax]

Wings said:

Quite shocking how easy the UK allows businesses to incorporate, together with the huge percentage are allowed to easily dissolve.

What's shocking about it?

If you extend £50k of credit to any company you're obviously running a substantial risk in your own business. There are many ways to protect yourself, including cash on delivery, limiting the line of credit, discount for Direct Debit, factor the debt, etc etc.

[Badda]

No chance OP. If he had a ccj, then slightly more leverage - ie he could put his claim in for the full 100k.

As it stands, nope. Soz.

[StevieBee]

Panamax said:

Wings said:

Quite shocking how easy the UK allows businesses to incorporate, together with the huge percentage are allowed to easily dissolve.

What's shocking about it?

If you extend £50k of credit to any company you're obviously running a substantial risk in your own business. There are many ways to protect yourself, including cash on delivery, limiting the line of credit, discount for Direct Debit, factor the debt, etc etc.

I would imagine the shock being referred to relates to property whereby a company builds a house, that 5 years later needs underpinning or some other major fault remedy that would rightly fall under the guarantee that the builder would be obliged to offer at sale. But if that company no longer exists, there is no means for that guarantee to be honoured.