The Manchester firm was acquired by Rymack Sign Solutions, which trades as PFI Group, in May 2022.
The £3.17m deal involved four annual deferred consideration payments, which PFI failed to pay.
Works Manchester had sales of £4.1m and made an operating profit of £264,325 prior to PFI’s involvement.
Administrators from FRP Advisory were appointed at the end of last year, and the business was subsequently shut down with the loss of 91 jobs.
In their first report into Works Manchester’s collapse, joint administrators David Acland and Anthony Collier said that FRP was first contacted in October 2023 by invoice discount provider IGF Business Credit, which had concerns about the company’s viability.
“It was established that following the acquisition by Rymack in 2022, errors occurred on the HMRC submission post-sale following the transfer of a number of employees to the company from another group entity resulting in a dispute over the PAYE due,” FRP stated.
“The account was already in arrears at that stage and while the company tried to work with HMRC to rectify the error, no payments were made.”
In December 2022 Works Manchester entered a time-to-pay agreement with HMRC but failed to adhere to the terms.
By September 2023 HMRC had notified the company that the total PAYE liability was more than £600,000.
FRP’s review began on 19 October 2023, and found that Works Manchester was also making staged payments against the June VAT return and had agreed payment plans with a number of key suppliers.
“The company was insolvent on a cash flow basis and creditor pressure was increasing.”
An attempted fire sale resulted in one offer for the company’s assets of £44,000, which was rejected.
PFI Group CEO Darren McMurray filed a notice of intention to appoint administrators on 6 December, and on 11 December the company ceased trading.
The directors – McMurray and COO Steve Bramhall – have yet to submit a Statement of Affairs.
FRP’s estimate of the Works Manchester financial position found that creditors owed £4.7m, with trade creditors owed £1.43m.
“Associated companies” are owed £188,231.
HMRC’s secondary preferential claim totals £866,928.
FRP also found that there are unpaid pension contributions.
IGF, owed £513,957, had a debenture and is likely to be repaid in full.
Unsecured creditors are unlikely to receive anything.
The estimated total deficiency is just under £4.6m, including £1m with the Redundancy Payments Office.
On 15 December Service Graphics acquired Works Manchester’s intellectual property and work in progress for £38,000+VAT.
Sanderson Weatherall’s auction of Works Manchester’s unencumbered assets raised around £140,000.
Printweek has attempted to contact McMurray for comment.
