The £1 million+ costs of 'going bust'!

by our FINANCE STAFF

The financial collapse into insolvency of two members of the Avocet family of 'disruptive technology' businesses has already generated liquidation and administration costs of over £1 million, none of which will be met by the directors of the respective firms.

Financial information about the time costs, expenses and fees paid for specialist advice racked up by the liquidators of Omega Infinite PLC and the administrators of Orrdone Farms Ltd. can be found in recent progress reports to creditors of the companies who are themselves owed in excess of £25 million, according to claims submitted.

In both cases there are insufficient assets to meet the considerable costs of the insolvency experts who were drafted in to investigate Omega's and Orrdone's complicated affairs.

UK Agricultural Lending Ltd. [UKALL], the farming financiers owed more than £4 million by Orrdone - a £1 company headed by controversial businessman Martin Frost - has supplied cash towards payment for work done by joint administrators Emma Porter and Jeanette Brown. Mrs Brown relinquished her position in February leaving Ms Porter as sole administrator.

A report published by the Orrdone administrator this week told creditors: "There have been insufficient asset realisations in the case to cover the joint administrators' time costs. UKALL has provided funding to allow Mrs Brown's time costs to be paid covering the period to her resignation. £84,975 plus VAT has been paid.

"Ms Porter has agreed with UKALL that she will defer payment of her remuneration until the outstanding issues in the case have been progressed".

According to figures published in the report the administrators' time costs so far amount to £351,552 with expenses shown to be £113,203 and forecast future time costs a maximum of £150,000. So-called Category 1 payments (for professional advice/services) total £40,026 with at least a further £50,000 needed under this heading, because of 'all the inherent uncertainties connected with the case'.

A breakdown of the Category 1 schedule shows the following items: pest control £1,779; site security £120; rates £338; gardening £2,062; planning fees£7,838; legal advice £20,451; auctioneer's agents £500; and insurance £6,936.

Meanwhile, Omega Infinite joint liquidators Ashleigh Fletcher and Joanne Hammond provided details of their liquidation costs in a report published in July. In this case creditors are claiming a total of £20.9 million, with the liquidation costs approved by a resolution of creditors on July 30th 2020.

Total time costs so far are given as £317,679 (990 hours @ £320.79 per hour). In addition MD Law (Yorkshire), a specialist firm, provided legal advice at a cost of £30,290. And valuers and insurance providers Eddison is receiving £55,534 for services rendered. Other costs include a £5,000 Official Receiver's administration fee and a £6,000 Secretary of State's fee.

Yesterday we reported that the Orrdone Farms administrator was pursuing legal action under the Insolvency Act in a bid to force all three of the company's former directors to assist with her investigation. So far the board members have refused to co-operate and have ignored all requests for information, according to Ms Porter.

A keen observer of the Avocet Group's financial plight told us: "The costs [of liquidation and administration] are much higher than they need to be because of the directors' breach of their fiduciary duties by failing to cooperate with Aver [Orrdone administrator], and in the case of Omega, again contrary to their fiduciary duties, the failure to provide any annual accounts since 2017.

"It should always be remembered that neither of these penniless companies ever produced a single marketable item which makes the current situation all the more remarkable and unacceptable".