Job loss - Any accountants etc help please?!!

[Doesthislookok]

DBro has been laid off along with 6 other workers due to company not doing well. Company is set up as a private director (and his stay at home wife is the other). They go on holiday and are always splashing the cash. Something smells off to me.

I can see accounts on internet.... do they look in order, I have no idea but doesn’t suggest they are struggling enough to lay off?

He had no warning, was employed as a contractor as is really going to struggle

Last years books are irrelevant, seeing as the virus hit this year ...

Those accounts are a) balance sheet only and b) 18 months old.

So we can't tell much from that really.

It made about £100k between Apr 18 and Apr 19, but its debtors were up - if they carried on increasing then they will have been a big risk and if they've had debtors that haven't paid, reduced income and high fixed costs they might have gone bust due to cash flow issues.

The company itself was set up in 86, so it's not a set of directors that just dump and run, or doesn't appear to be.

Agree with PP. The financial statements should be a true and fair view of what happened in that financial year. This year could be totally different for the company.

As an example, any hospitality company who filed with companies house prior to say February, likely looks good compared to their current state of affairs. Going concern queries are only likely to have arisen since lockdown started.

I feel for him, but this is always the risk with contracting, he is cheap and easy to let go compared to permanent staff.

The directors and company and separate entities and while one may be able to afford holidays, it doesn't mean the other is doing well. This is why the shareholders limit their risk to the shares purchased.

Thanks - sorry am clutching at straws but trying to be helpful as he thinks they seemed to be doing well. The current director not owned since 86. If not audited does that mean they could be false?

Thanks for basic questions...have no knowledge clearly

I’m afraid the accounts up to 30 April2019 aren’t going to tell you much and the 2020 ones that will suggest the early impact of Covid won’t be available for months.

The directors are allowed to spend their money as they want to but there are few Covid winners and it’s highly likely the business has taken a big hit due to covid

The accounts could be wrong but they aren't terribly likely to be because directors would be in breach of their duties.

No, they haven't been the owners but it's not got huge numbers of subsidiaries or random top cos or weird company structures or changes of directors which can all be warning signs.

It had a decent amount of cash last year but we don't know what the turnover is and Covid is so unprecedented that it's hard to know what the impact would be.

I can also see from companies house that there Are only two shares in existence, both owned by the director and his wife? Does that seem above board??

I can’t really read the screenshots very well, but it looks like they are saying they are exempt from audit under the Companies Act which is likely to be entirely legitimate (they might not be big enough, and there are other exemptions from audit which escape me right now).

It would be better to focus these energies on finding a new job/supporting him with his job search if he wants your help.

Not sure what you're hoping to achieve with this?

If not audited does that mean they could be false?

Only businesses with a turnover in excess of £5million a year are obliged to have an official audit. Smaller companies don't have to have one.

@Doesthislookok

I can also see from companies house that there Are only two shares in existence, both owned by the director and his wife? Does that seem above board??

Entirely normal.

No issue with the shares either - only massive listed companies have lots and lots of shares which are available for the general public to buy. This will be a private company limited by shares, which just means that the shareholders, which in this case are the director and his wife, have their liability for losses limited to the investment they put in to the company. en.m.wikipedia.org/wiki/Private_company_limited_by_shares

@user1294625849274

It would be better to focus these energies on finding a new job/supporting him with his job search if he wants your help.

Not sure what you're hoping to achieve with this?

Agreed. It just seems unfair that he seems to be very well off and continues to be spending well when families are suffering

A limited company is an entirely separate legal entity in its own right.

The directors may very well have other businesses or sources of income you know nothing about.

If the company has suddenly had recent issues with getting its customers to pay their bills, or if some of those customers have gone bust, then the company may have no means to pay its staff or suppliers, hence the need to let people go at short notice.

@cringeworthit

If not audited does that mean they could be false?

Only businesses with a turnover in excess of £5million a year are obliged to have an official audit. Smaller companies don't have to have one.

The small company limits are now up at £10.2m for turnover, so very few companies really need to be audited now.

These accounts are prepared by a firm of Chartered Accountants, so I would hope are accurately prepared.

The tax liabilities of the company would suggest that in 2019 they had made pre-tax profits of around £267,000, but with retained earnings only increasing by £106,000, it would suggest that the directors drew dividends of around £160,000 during the year.

On the basis of the 2019 accounts alone it looks like a good, profitable business.

A PP is correct - trade debtors being on the increase might indicate that they may have difficulties with some of their customers, or it could just indicate they did a large amount of work at the year end.

It doesn't indicate of course what could have happened to the business since then. I have a client who four years ago was turning over £900k a year. A year later it was £500k, last year it was £150k and this year it was £13k (yes, 13...). Depending on the industry, clients, etc, things really can change that quickly.

OP - How does your DP think business has been? Are the other people laid off contractors too or permanent staff?

If he feels it's been business as usual, it may be a case of a good excuse to get rid of people, but it could be that business has massively decreased and they are worried.

Unfortunately as a contractor your DP has no comeback whatsoever on the decision I'm afraid. The benefit of contracting is that it ordinarily attracts a higher hourly rate than a salary, but this is exactly the reason why - you're always at risk of being out of work.

I'm sorry you find yourselves in this position and I hope he finds something else soon.

Unfortunately OP all they have to argue is that the role is no longer required, not that they cannot afford to keep the staff on.

Also, the company is a separate legal entity. Whilst the shareholders may have withdrawn every inch of post tax profit out of the company and therefore not have enough reserves to see them through these lean times, providing the company had enough reserves at the time dividends were made, there's no issue.

It's similar to why Richard Branson (who's worth gazillions) has been slated for asking for a bailout for Virgin...morally dubious, but there's nothing to suggest anything illegal has taken place with regards to the accounts.

Their personal wealth or even the company's bank balance have nothing to do with redundancies. If the roles are no longer required they can be let go.

Why should the directors have to sacrifice their personal wealth to fund a job that isn't needed?

Fair comment although I guess we seem bitter as have worked there a long time. Director and his wife seem to draw a large salary but claim the business is struggling (which doesn’t seem the case).

Tax also seems low paid to me but again I know nothing. Thanks for all replies.

How does this info help your brother though?
It doesnt and you would all be better focussed on more productive things

I guess it puts his mind as rest that has t been screwed over.

As other posters have said, use this time and to help your brother get another job.

It's a business not a charity I'm afraid. Being a contractor doesnt give you the benefits of being PAYE.

@Doesthislookok

Fair comment although I guess we seem bitter as have worked there a long time. Director and his wife seem to draw a large salary but claim the business is struggling (which doesn’t seem the case).

Tax also seems low paid to me but again I know nothing. Thanks for all replies.

You can’t know that.

I own a Ltd company that has made at least £100k profit for each of the last 10 years.

This year it will be £0 or a small loss as we will have a minimum of 7 months with a 90% drop in income. There is little government help in our sector and all of our contracts are public sector.

If I make my staff redundant then I might breAk even. It is a very hard decision to make.

How does he pay tax as a contractor? Is he eligible for the seiss scheme?

Look, even if a company is doing well, they can still decide that a team or individuals aren’t needed as processes change. One of my previous workplaces made my entire team of 30 redundant because they didn’t see the value of the team.

It sucks for your brother and if he’s been at the same place for a long time, I can get he would anxious about looking for a new job. Even without the current climate. However, he would be better directing his anger and energy into getting his CV up to date, looking at coaching sessions and finding a new job.