This case study looks at the reasons why Koine Money Limited, the London-based crypto custody and settlements infrastructure provider was placed into Company administration – disruption caused by Covid-19 was a factor. It goes on to look at the work that the Joint Administrators, Antony Batty and Hugh Jesseman, have undertaken in the first 6 months of the administration, giving a snapshot of the role of an Administrator.
The path to insolvency and Company Administration
Incorporated in March 2018, Koine was created to provide a secure, easy to use institutional custody, settlement and cash management service for the new generation of digitised assets.
The Company was in the process of raising investment finance to fund its growth in early 2020, as the Covid-19 Pandemic hit the UK. As a result, promised investment did not materialise, and the Company was unable to honour its obligations from mid-2020. The Company managed to reduce overheads and operate by utilising the Government Furlough Scheme.
However, in early 2021 it became apparent that investors were unlikely to fund the accumulated debt and given the risk of breaching FCA Capital Requirements, the Board resolved to cease trading on 19 February 2021. The Company was insolvent and the Joint Administrators were appointed.
The Purpose of the Company Administration
As with any administration, administrators must perform their duties in the interests of the creditors to achieve the purpose of the Administration, which is to achieve one of the three objectives set out in the insolvency legislation, listed below.
(a) Rescue the Company as a going concern.
(b) Achieve a better result for the Company’s creditors than would be likely if the Company were wound up (without first being in Administration).
(c) Realise property to make a distribution to one or more secured or preferential creditors.
Objective (a) is always our first aim when we are appointed, not least because that route also preserves jobs and maintains trading in some shape or form. However, it quickly became apparent that this could not be achieved as no purchaser could be found for the shares of the Company. In addition, the highly specialised nature of the Company’s trading operations and its financial circumstances meant that an alternative recovery procedure, Company Voluntary Arrangement, was not appropriate.
As a result, we are seeking to achieve objective (b) for the Company through a going concern sale of the business and its assets, within the 12-month maximum duration for Administrations set by insolvency legislation.
Our Key Actions in the first 6 Months of the Administration
Once the decision was made to implement option (b), our detailed work began. Upon our appointment, the Company ceased trading and in the first 6 months. Some of the key steps taken were as follows:
- Bank Accounts. Freezing of the Company’s bank accounts to allow recovery of the balance of the Company’s accounts at the date of our appointment.
- Redundant Employees. We set up a case with the Government Redundancy Payments Service (“RPS”) and provided the redundant employees with the necessary information to make their online claims for arrears of pay, redundancy and Pay in Lieu of notice. We held online and telephone meetings with the redundant staff and also provided further information from the Company’s records to the RPS to allow these claims to be processed and settled.
- HR Work. We engaged the Company’s existing HR advisor to assist with the completion and collation of information to send to the RPS, to enable the employees claims to be processed.
- Lease for the Offices. We sent notice to the Head Office Landlord to request an informal surrender of the lease held for the Company’s offices, which have now been vacated.
- Notification to Creditors. We sent out notification to all the Company’s creditors and previous agents and the necessary notices to H M Revenue & Customs.
- Appointment of Solicitors. Engaged to assist the us with filing the necessary notices at Court, validating and advising on the Charge held with the parent company Koine Finance Limited.
- Appointment of Valuers. Engaged to provide a valuation of the business and its assets and to market the business and its assets for sale.
- Appointment of Accountants. Engaged to prepare and submit the P45s for the employees, re-run corrections on payslips and to assist with submitting a final claim with the Coronavirus Job Retention Scheme (“CJRS”).
Further Actions
- To achieve the objective of the Administration of the Company, we will be pursuing interest in the business and assets of the Company and aim to achieve a sale of the Company’s assets. We now expect the Intellectual Property of the business to be sold following Liquidation.
- A successful claim was made with the Job Retention Service regarding the employee agreed furlough payments to the date of redundancy.
- In addition, we liaised with the RPS and the pension provider to progress the employee and pension claims respectively.
Based on currently available information, it appears likely that a dividend will be made to preferential creditors, but not to unsecured creditors.
The Administration will remain open until the realisation of the Intellectual Property and other Company assets has been finalised. We estimate that this will take approximately six months, and once these matters have been finalised the Administration will cease and the company will be wound up.
Talk to us if your Company is in Financial Distress
Many companies are facing financial distress because of Covid-19, and this can lead to insolvency, as this case study shows. As Licensed Insolvency Practitioners, our first aim is to see if we can rescue an insolvent company and, in this case, as always, we had several conversations with the Board, to advise them of the various options considering the financial difficulties of the Company and to determine the optimal route forward in the best interests of the creditors. Rescue was not possible here, but the Administration has bought the time needed to achieve a better result for the Company’s creditors than would be likely if the Company was liquidated and wound up straightaway.
Now that most Covid-19 business support has stopped, we anticipate there will be many more cases of businesses becoming insolvent despite their very best efforts to survive. The sooner our advice is sought, the more likely it is that a rescue and turnaround procedure, such as a CVA or Administration can be implemented. If it turns out that there is no alternative to liquidation, we use our expertise and experience to ensure the process is as orderly as possible.
