Unpaid wages, winding up petitions, etc

[dspp]

There's a situation developing at a supplier of mine in Scotland where I know quite a few of the staff. I suspect I'm going to get asked for some advice and it is not my specialist area so I'd appreciate a few pointers.

The supplier has been struggling. It is a ltd co in the hospitality trade. The old owner has thrown in the towel and recently (a month or so) sold the business to a new owner, i.e. has sold all the shares in the ltd co to a new sole owner (or at least it was a sole owner on the day of sale, see further down for a development since). I am guessing from checking accounts and knowing some info that they paid about £500k. The new owners are now in and running the business. Paid up share capital is only £100, i.e. well below the £120,000 break point. There is nothing in the public domain about terms of sale (e.g. is there an undertaking for the old owner to clear outstanding debts). It is absolutely certain that the same ltd co has continued through the sale.

Only problem is that the old owner did not pay a load of the staff in the run up to the sale. So a dozen staff have a variety of unpaid wages. Quite a few of them got fed up with not being paid and went and found new employers, but they still are owed. Some have stuck it out, but are still owed. We are talking low paid minimal wage staff, not high powered types. None of them are unionised. The new owner is not paying them the 'old' owed wages and is refusing to recognise the debt.

I am not yet sure what documentary evidence they have of the unpaid wages. I think there will be payroll records in their possession for the months/weeks they were paid, but I am not sure about the period they were not paid. I am also not sure if any one individual is owed an amount above the £750 required to seek a CCJ and then a winding up petition. Collectively they certainly are above the £750, and I guess that one or two of them might individually be, but as yet I am not sure. Collectively I am guessing that £5-£15k is owed across a dozen people.

The old staff who left are trying to embarass the business into paying the debts (social media stuff). The ongoing staff are too scared for their jobs to do that, and hoping the new owner will pay.

I have checked a few things and the new owner has a background of iffy business practices, with many similar businesses being rapidly shut, reopened, property developed etc. A dozen or more times at least just from doing some minimal online searches. Frankly they look highly unpalatable.

My suspicion is that the new owner will be on the verge of prepacking to flush the debts. So time is likely not on the side of the unpaid staff. In fact the new owner has immediately flipped 75% of the shares to another company under their control, that has been used for quick flips in the past, and left dormant in between.

Both the old owner, and the new owner, live a long way away from their various businesses. It is quite clear that both the old and new owners are not poor people.

I have to visit that supplier soon, and am highly likely to be asked by both the left staff and the ongoing staff for advice. (It is a small place)

I suspect that there are unpaid trade debtors as well, overdue accounts etc.

(I am still mulling over whether I will continue to use the supplier. I do have alternatives, and my purchases are absolutely not critical to either their or my business. So essentially I have no leverage that way.)

Q1. Can the staff seek a winding-up petition on the back of a unpaid small claims court order ? Or do they need to go to county court first ?
Q2. Can the staff act collectively in any way, and is this to be preferred for any reason ? They are all skint.
Q3. Is there any way that the staff can address either the old (or the new, or both) underlying owners, as well as simply the 'face' ltd co, i.e. can the staff get at the real pockets with money in them ?
Q4. Any advice at all ?

regards, dspp

[stockton]

It is a long time - 30 years - ago, but there certainly was a little used provision in Scottish law that anyone who was owed money by a limited company could apply to a court to have the company wound up - no preliminary court proceedings required. In effect if a company cannot pay its debts it cannot be solvent.

When I suggested that I might do this I was paid immediately, but in your case it is not clear what the companys reaction might be. Possibly if you get your winding up petition in before the company, you might get to appoint the liquidator.

[stockton]

The relevant web page appears to be https://www.mygov.scot/wind-up-company/.

Note that the Scottish legal system is designed to enrich lawyers.

[Dod101]

.Note that the Scottish legal system is designed to enrich lawyers.

That of course is probably nonsense. Are not all legal systems designed to enrich lawyers?

Dod

[stockton]

.Note that the Scottish legal system is designed to enrich lawyers.

That of course is probably nonsense. Are not all legal systems designed to enrich lawyers?
Dod

The warning was serious. Just compare the English small claims procedure with the Scottish version.

[dspp]

Dod, Stockton,

Thank you. That's the Scottish version of the English one I have used myself when chasing debts (successfully), and has the same thresholds (£750) etc. The process has plenty of time lags in it, and so there is plenty of opportunity for the new owners to do a prepack or similar shuffle if they wish.

So I guess, in essence, my question becomes:
- is there any way they can get an injunction to prevent that ?
- is there any way they can get at the real money (in either the old or the new owner), rather than the assetless shell ?

regards, dspp

[stockton]

That's the Scottish version of the English one I have used myself when chasing debts (successfully), and has the same thresholds (£750) etc. The process has plenty of time lags in it, and so there is plenty of opportunity for the new owners to do a prepack or similar shuffle if they wish.

That is one reason for the warning - Scottish legal processes can be much less user friendly.
I was wondering whether initiating a prepack would "confirm" that the company has been trading while insolvent, and your friends could consequently suggest that there might be some unpleasant consequences should a prepack be implemented.

[dspp]

Thank you, let me think about that. regards, dspp