Clothing Retailer

The Company operated a retail outlet selling ladies’ mid-priced fashions. Initially, the Company traded from, Wood Green, London and it occupied leasehold premises.

With merchandise well suited to the local clientele, the Company built-up a loyal customer base with sales increasing year on year. As the company expanded, it acquired leases to the adjoining two units, to increase its retail space.

The Company also opened and closed several other units, outside of the precinct, to take advantage of opportunities to open in prime locations for a limited time, sometimes only a few weeks, on an informal basis.

With some reserves available in the Company, the director decided to purchase a freehold property as an investment for the Company. The property was purchased and a mortgage was granted in favour of the company’s bankers.

The property was let and the net rental income paid into the Company’s bank account.  This property was subsequently sold at which time the mortgage was redeemed. The bank also granted an overdraft facility supported only by the Director’s personal guarantee.

Unfortunately, a large low-cost retailer clothing store opened in the shopping precinct and virtually overnight sales fell by circa 50%.

To combat this, the director began to introduce cheaper ranges and he also tried to entice customers with sales and special promotions.

However, with the level of sales still below those previously enjoyed, he approached the landlord who agreed to reduce the rent and assured him that he would be relocated to another unit, not so close to the low-cost store, as soon as one became available.

Despite these assurances, and reducing the rent further, no new unit became available and in the years that followed, the Company struggled to break even.

The Company suffered a trading loss of circa £150,000 necessitating the introduction of personal funds from the director to support ongoing trading.

Soon after, the landlord, who was keen to re-let the units to a larger multiple looking for a presence in the centre, forfeited the leases on the grounds of non-payment of rent, with an agreement that the outstanding rent, after deducting the rent deposits which they were holding, would be written off.

With a deadline to vacate the premises and with no alternative unit available, the Company ceased to trade.

With insufficient funds available to discharge the residual liabilities, professional advice was sought from AABRS and the recommendation was that the company had no option but to enter into creditors’ voluntary liquidation.