Administration rescues care home

How quick thinking saved a successful care home and protected the interests of residents and creditors.

The situation

A south coast care home had built up substantial tax arrears. HM Revenue & Customs (HMRC) had written to the company several times. However, the registered office was no longer used and the letters were not received. After some time, HMRC issued a winding up petition. In due course, the company went into liquidation, damaging its ability to trade and forcing redundancies and the sale of assets.

On the day of liquidation, the Official Receiver was automatically appointed but called Ranjit Bajjon of Atherton Bailey's Worthing and Crawley offices to ask her to act as liquidator. Since the home was still operating, Ranjit's role was to immediately manage operations and then agree a strategy with creditors to maximise their returns from a business sale.

What we did

After assessing the company's financial position, Ranjit found it should have been making a reasonable profit. It was also evident residents were well cared for and the home properly run on a day-to-day basis by the employed manager. Ranjit concluded there was a viable business which could be rescued for the benefit of all stakeholders. But time was of the essence.

The first step was to convert the liquidation into an administration to allow the business to continue trading. As administrator, Ranjit managed the company's financial trading activities, collecting fees and paying day-to-day expenditure, including wages.

The result

With the creditors' agreement, Ranjit continued to operate the business until a market value sale could be negotiated and completed. The manager of the home was the successful buyer. As a result of the sale, all creditors have been paid in full - including the costs of the liquidation and administration. The business is now thriving under the new management.