The receiver arrives

34 years ago, my dad’s newsagent business went bankrupt. I was 20 and in the middle of my degree. The story of the process provides a number of lessons.

The first we knew about the problem was when my dad announced he was due in court the next day! This tells you the first thing:- Denial is futile! If you’re facing disaster, start preparing at the earliest opportunity. With no proper records of the business, the task of discovering the creditors and debtors was near impossible. However the court demands these and contempt of court simply adds to the problems!

A receiver was appointed and he proceeded to minimize additional debts and collect easy money. So he turned off the electric to the shop’s freezers!  £££s of salable goods melted before our eyes.  The receiver had no interest in maximizing asset recovery, just his fees! The relatively small value of the estate meant that he wanted to spend as little time on the process as possible.

As the business was a newsagent, the goodwill and stock was highly perishable. If no papers were delivered for a few days all the customers would be gone. This worked in our favour as it happened as I took over the proprietorship of the newsagent, employed my father to run it and the business rose like a ‘phoenix’.  When the receiver asked for payment for the goodwill, we told him to get lost and it was accepted.

Fortunately, our main suppliers were kind - they accepted the new business, partly because my father had good relationships with most of them. Indeed, the newspaper wholesaler carried on providing weekly credit terms, rather than cash, even though he lost a few week’s invoices in the crash.

I bought an off-the-shelf company (Unipalm Ltd), put the phoenix business in it and made my father an employee.

The next battle was for the house. We argued that my mother should be entitled to half the equity, just as she would if my father had divorced her. Indeed the receiver was in effect trying to ‘divorce’ my mother’s interest. After a number of court cases, my mother succeeded in keeping her ‘half’ of the equity.

With this we then got the building society to cover my father’s lost half and outstanding debt with a mortgage to her, in spite of the fact she had no income!  But now my father was an employee of Unipalm Ltd with ‘visible’ earnings. I’m not sure the courts work like this now, certainly building societies are less likely to behave based on a long term relationship.

With me as managing director I ensured all records etc were kept properly and the taxman was treated appropriately. And my fathers business continued until his retirement. In a happy ending, the fact my father was an employee allow him to take advantage of a number of state benefits not available to him as self employed. He retired early at state expense, we sold the business to provide a small nest egg and he lived happily in Chatteris for the rest of his days.

Ironically, the bankruptcy turned out to be the best thing to happen to him, as it relieved him of a massive amount for stress. It also grounded me in business and indeed Unipalm Ltd was the base from which my later business activities would blossom.

Today I had another call from someone whose business is being put into administration. There are lots of things to do in these circumstances, and letting others do them isn’t one of them! Bear in mind that you have valuable intellectual property in your head, that the receiver isn’t benevolent and that many of the valuables around you belong to others, not to you, nor the receiver!