The news that Midas Group Limited and its main subsidiary has gone into administration is very unwelcome news for the region. A total of 303 Midas employees have been lost so far, with likely hundreds more to follow. The failure will affect numerous construction projects across the South West, including three in Devon. The pain will more widely be felt too, with subcontractors and suppliers of materials further down the chain to varying degrees who are dependent on Midas. Even if the business, or parts of it, are taken over, existing contracts will have to be renegotiated.
The initial pain will be felt perhaps most by creditors and employees.
Creditors will be affected by an automatic moratorium which means that a creditor will not generally be able to bring or pursue legal proceedings against the company or its assets. In many cases, the best option is for the creditor to submit details (a proof of debt) of its claim to the administrator and then wait for the administrator to assess it. There are time limits within which claims must be brought (for many breach of contract claims, 6 years from the date of the breach) and that period continues to run notwithstanding the moratorium. In such cases the administrator’s acknowledgment of the liability will restart the limitation period, and in older cases that may be a sensible step. A creditor’s position may also be affected by his position – for example whether he had effective security in place over asset(s) of the company.
Sadly, 303 employees are reported to have been made redundant already. The fact of administration does not mean that those who remain will have been automatically dismissed by reason of Tuesday’s news – it is possible for the administrator to “adopt” contracts of employment, and where that happens “qualifying liabilities” – wages and salary – will be paid by the administrator before his own fees are paid. Regrettably, sums due to employees that accrued before the administration rank as unsecured claims.
The administrator’s job at this stage is, if possible, to rescue the company (as opposed to the business). If that is not possible, the administrator will try to achieve a better result for the creditors as a whole than would be achieved through a liquidation. In many cases, administration leads to the sale of assets, often as part of a sale of the company’s business as a going concern, or by the sale of parts of the company’s business as a going concern. Indeed, those options are clearly being looked at now (and Bell Group has already acquired the Mi-Space part of the business).
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