Following the collapse of Stuarts Industrial Flooring, the largest in situ concrete flooring specialist in the UK, the administrators at KPMG have reported that the employees will be paid in full all their arrears of pay. The firm had a turnover of £22m but it owed trade creditors £1.5m. It is unlikely that that unsecured creditors will receive any dividend. Remarkably the company also had £4.1m of debtors but the surveying firm charged with collecting this in have only recovered £244,320. Of course it is not known if all these debtors are still trading or indeed if the amounts in dispute that might explain the low collection rate but KPMG have said "a significant proportion" is uncollectable.
Employees were owed £78,000 and as they are preferential creditors they come before the trade creditors.
So how do creditors rank in line when a business becomes insolvent? See our page on creditors rights in insolvency
The business and its parent company Stuarts Holdings provide a cross guarantee to secure a £2m debt owed to Lloyds Banking Group by Stuarts Properties, a related company with common ownership which is outside the group.
"Should the cross guarantee be called upon by Lloyds, Stuarts Industrial Flooring will have a subrogated claim against Stuart Properties in respect of the bank's security held over the assets of this company," the administrators' report said. It is not yet know if Lloyds will call on the guarantee.