Firm’s deficit $116,749

Press, 15 April 1978, Page 7

Firm’s deficit $116,749

A building and drainlaying firm which got into financial difficulties last year, after running a successful business for nearly five years, now owed 112 unsecured creditors $241,134, said a Deputy Official Assignee (Mr L. Anderson) at a meeting of the company’s creditors. The firm, Hornby Building and Contracting Company, Ltd, also owes three secured

creditors $16,200. The estimated value of the securities is $29,300, leaving a surplus of $13,100. As a preferential creditor, the Inland Revenue Department is owed $24,834 in unpaid P.A.Y.E. tax, and a debenture holder is owed $11,492. The firm’s estimated assets total $160,608, leaving a deficit of $116,749. However, according to Mr Anderson, this sum might rise drastically because of lien claims, maintenance matters, and the cost of finishing contracts left incomplete. The three directors of the company said that the main reason for their bankruptcy had been their inexperience in drainlaying, an aspect of the business introduced late in 1976. Until they branched out into that business, they had been doing reasonably well. The weather last winter had considerably worsened their problems, they said. As the work gradually lessened, there had been a shortage of cash flow, and the economic climate in the building and construction industry had also been partly to blame.

The firm’s secretary told the meeting that the company’s strength had been in its working directors who had applied diligence, skill, and knowledge of the building industry to their building and plumbing work.

Their weakness had been a serious limitation of working capital necessary to generate resources from the profits before contract work could be undertaken, he said. The economic downturn beginning in 1976, coupled with the bad winter for builders had made that lack of liquidity more apparent, and his firm had recommended to the directors that they should not accept big contracts but should wind down the business. However, the directors had thought differently and had decided to accept drainlaying work. That had not been unreasonable, as all previous completed work had been profitable for the firm, the secretary said.

The drainlaying work had proved beyond the technical and financial resources of the company, and in March this year the company had been wound up. he said.