Yet another local electrical contractor of many years standing has hit the wall. Rumours abound with some saying they went for £5M. What I do know for sure is that a labour only sub has been hit for £200K with a fairly well-known firm of consultants not far behind. Seems the same old story is set to go on running.
As long as people try to run businesses, the ones who are poor at it, will fail at some point.
Some, try to get as much out in as short a time as possible before the collapse.
It needs to be much harder to close a company in heavy debt; in this country (by which I mean in the UK) it is too easy to do.
I think a financial audit of where the money has gone should be mandatory for any company going out of business with debts, to decide where all of the money has gone - if its easy to see how bad business has done the company in, then fine, but if the money has been siphoned off by top management and shareholders, then not so fine. The costs for this audit however are not so easy to asign or pay for.
I don't agree about companies reasons for going bust can be down to them as I have worked for quite a few electrical companies that have had this happen... on a couple of them then yes, they brought it on themselves BUT, the others went bust because they trusted others to pay them... I was quite big, years' ago, and I had problems getting money out of people I worked for and I was owed thousands at one point from one building company, based in central London, but - thankfully I eventually got it BUT multiply my business by 10 fold and then you can run into BIG trouble because when you're dealing with huge works you are then committed to do more and then when the payments fall behind you're in an ever downward spiral and so, if they don't pay / go bust themselves... this is where you go bust!
I have plenty of stories, as you can imagine, but I won't go into them suffice to say... I kept my works small after I had had lot's of so called 'sparks' working for me and - I made as much money as I did before but without the stress and my son has followed my advice too.
I did not mean to pick on small companies in particular. (I'm a small company)
Tier 1 contractors down to small companies - if you go out of business with debts, an investigation should be carried out to show where the money has gone and money recovered if at all possible. (Not for the company that has gone out of business as they'll no longer exist as an entity)
If the company has gone bust because the big company has been delaying payments or not paying - This money might be recovered from above
- the big companies
- or the clients
- or the owners
- or shareholders depending on where the money has gone.
I know full well that's not an easy thing to do though.
It really angers me though when the big companies try to run me out of business (and they have circa 4 times now over the last 13 years). If they had been successful, the wholesaler and my suppliers would then get shafted by me........there should be a way for the debt to be recovered and my wholesaler and suppliers to get paid in that circumstance.
Even worse when the big company goes out of business, this is when the last ditch effort to recover owed debt should include owners, shareholders, top management bonuses etc.
BUT BUT BUT - that's why we own limited liability companies so as the name implies, the debt only is limited to the assets of the company and nothing else (Not my private home, bank account or assets)
So its difficult, I know.
Its also too easy to own multiple businesses and to shut down a single business, leave a load of HUGE debts to suppliers and carry on as if nothing has happened.
Its too easy to open and close a business in a year for example before the tax man catches up to you.
etc.
But the government also wants to encourage us to open and run and grow businesses so they cant stifle that unintentionally.
I agree, that when a company (no matter what the size) declares bankruptcy, it should NOT be a 'get out of jail' card. The industry (and all industries) abound with stories of 'he set up a new company the very next week'.
But as a subcontractor to a one man band electrical company, I am well aware of the angst over bills that 'we do 60 day billing' from larger companies can cause. You may well do 60 day billing, but our wholesalers do not. They usually do 30 days. Max.
So I can see how this happens :(
The law needs to be changed, to prevent companies deliberately misusing their 'clout' to force the hand of smaller companies.
