Administrators’ cupboards always bare?

02/02/2010
Unsecured creditors of Smartfundit.com Limited - in Administration, the failed web finance platform company, say it looks unlikely they will receive any distribution from the administration process. They have been informed that total claims from unsecured creditors total an eye-watering £3,163,193, including a large amount (£2,907,183) owed to Corporate Computer lease Ltd. As regards the company’s receipts and payments in the administration period to date, the receipts have been rather thin, and total only £2,182.01 (there having been just £1,134 in the bank originally), and debtors of £14,095 considered to be irrecoverable. However, there is a secondary stream of income from brokered lease contracts, and to date some £900 has been received. Payments totalled £394.97, leaving a balance in hand of £1,787.04. Despite this meagre showing, none of the offers made to the administrators from interested parties have been considered worthy of recommending. A similarly story of bare cupboards applies to Five Diamond Securities Limited - in Administration. There, asset realisations total a modest £2,400, while unsecured, non-preferential creditors total £163,239. Further substantial liabilities are covered by floating charges from a clearing bank, and a block discounter. Although it sounds a little naive, a casual obsrver might wonder how such a large discrepancy between realisable assets and liabilities has the chance to develop. A company is pushed over the edge into insolvency by a single payment/liability. Presumably at that point the directors must act, and the company must cease trading. If this happens according to the book, then the discrepancy between realisable assets and liabilities, should not exceed the single liability that triggered the insolvency . . . so how do companies end up with a large discrepancy? As it is, one would think that accounting departments would have already predicted the event in their budget forecasts for the month?

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