Copied below is a statement circulated by email by Roger Maile which should clarify matters.
AREM PUBLISHING LIMITED
OUTLINE OF EVENTS LEADING TO DECISION TO CEASE TRADING
The company published magazines, books and electronic media aimed at the photography serious enthusiast market, together with a mail order service for materials fulfilled by another company.
The management accounts for 2005 indicated a profit of around £20,000, confirming a significant turnround on the first year start-up loss of around £50,000. This left cashflow tight, but it was believed to be manageable assuming the trading performance continued to strengthen.
In the spring of 2006, the sole director Roger Maile, injected further personal funds of £25,000 to strengthen the cashflow. £5,000 of this was allocated to the purchase of the capital equipment and the balance was allocated to be drawn down in lieu of salary, clearing the way to attempt to attract new ordinary share capital investment in the business (at which time, the balance of directors loans would also be converted to shares, so that new investors could be assured that their funds would not be directed to paying off directors loans).
Shortly after this money had been injected, the trading performance of the business declined noticeably. The initial belief was that this reflected inertia on the part of customers during an exceptional and sustained period of very hot weather.
The company initiated promotions during the summer to try to counter the downturn in trade. This included mailings launching a Summer Festival with print sales, extra discounts and other special offers and the launch of a new online service (paid by subscription). The response to these initiatives was weak and the trading situation did not improve.
Roger Maile contacted a number of people who had shown exceptional support for the business and interest in its activities, inviting a new share subscription to total between £25,000 and £50,000. Although one or two of the ensuing discussions might have led to raising a part of the target figure, the amount involved would be insufficient to address the mounting problems and the timescale envisaged by potential investors did not correspond with the needs of the business.
Matters were brought to a head in September when the mailing house refused to send out two newly published magazines, pending payments due of around £850. In normal trading circumstances, day to day income would have enabled us to meet such a demand quickly indeed, the total normal trade and government creditor position was around £15,000, which would normally be much less than a months trading income. However, because of standing orders, salary payments and so forth, we were unable to free up the money needed to get the magazines released and this delay inevitably worsened trading performance. Late in September, HM Customs and Revenue indicated its intention to get a distraint order unless a payment of around £2,000 was made.
At the end of September, in the light of the magazine delays, the threat of a distraint order and the inability to secure external investment of a sufficient amount, Roger Maile conducted a fundamental review of the business position and the potential to trade out of the situation. The conclusion was that the business was now insolvent and without a reasonable prospect of alleviating that position in the short term. Nick Charlton, the only other employee, was made redundant with effect from 30 September (he had been paid up to that date).
Detailed consideration and review over the weekend of 30 September/1 October confirmed the view that it was necessary to cease trading with immediate effect and seek professional assistance to close the business.
Roger Maile was able to arrange a meeting on 10 October with James Money of KPMG, Crawley. He confirmed that, in his opinion, appropriate actions had been taken. His view was that the saleable assets of the business would be insufficient to attract an insolvency practitioner to take on the responsibility of the liquidation of the business. He advised that under such circumstances it would also be unlikely to be financially attractive for an individual creditor to take on such action. Roger Maile was therefore advised to write to creditors explaining the position and to pursue any further discussions with them direct. This record of events has been written on 11 October as supporting material to go with individual letters to these creditors.
Roger Maile
Director
11 October 2006
Pity.
