Creditors of defunct broker Micro IT Component (MITC) are unlikely to see a return after liquidator Wilson Field confirmed that it will not be able to recoup one penny of the circa £250,000 book debt amid highly unusual circumstances.
The Slough-based minnow ran into cash flow difficulties last month and director Muhammed Furquan placed the business into Creditors Voluntary Liquidation (CVA) after seeking professional advice.
A creditors' meeting was convened on 8 July and the subsequent report compiled by Wilson Field revealed that debts totalled £177,000 with nearly £60,000 owed to Ingram Micro and just over £46,000 to Computer 2000.
However, the report stated that with respect to the £248,000 book debt, "The director has advised that these are all bad debts and no realisations are expected."+
It added: "On the basis of anticipated realisations, and after taking into account the costs of liquidation, it is unlikely that there will be a dividend to unsecured creditors."
MITC was set up by Faisal Riaz in 2007 to sell computer parts to resellers and system builders. It traded "smoothly" until March this year, a month after the appointment of Furquan who took full control, the report stated.
Furquan had extended credit to new and existing customers to "boost sales" and was "promised funds from his father to invest in the business to help cover the company balance sheet in case of difficulties with the new credit system."
The monies were not received and in April customers delayed payments and "the majority" did not pay in May which led to cash flow problems with suppliers demanding that debts be settled.
He than took made a highly unusual move of selling existing stock, valued at nearly £250,000 in Wilson Field's report, to an unspecified customer for £51,000,
"However the payment bounced and this money was never received," said Wilson Field, adding that without any stock and increasing supplier debts, Furquan had no option but to cease trading and liquidate the business.
Though this was a small insolvency, the circumstances surrounding it were "extremely irritating" said Eddie Pacey, Bell Microproducts credit guru for Europe, which was owed £9,000, and he called for a thorough investigation.
"Some may label it abject ineptitude and others may justifiably make more serious allegations," said Pacey.
"To see a book debt value of nearly £250k estimated to realise absolutely zilch, and inventory sold to a company for £51k whose cheque bounced and who cannot be traced, really does stretch the bounds of imagination," he added.
Nitin Joshi, founder at Channel Money, which is representing some distribution creditors of MITC, said the broker continued to order stock prior to its liquidation and was seeking answers from the liquidator.
"There needs to be a detailed examination of the conduct of the director, there are some major questions regarding the movement of stock," he told MicroScope.