The initial report from joint administrators Andrew Stoneman and Benjamin Wiles of Duff & Phelps, who were appointed on 7 November, will make grim reading for trade creditors as it seems unlikely that they will recoup any of their losses.
It reveals that the company had neglible assets other than its book debt, office furniture and IT equipment, as almost all of The Colourhouse's plant and machinery "was subject to hire purchase or rental agreements, all of which were in arrears".
According to the report, the company's records give the value of its outstanding book debt as £1.9m when it was placed in administration on 7 November, of which approximately £1.5m was owed to Bibby Financial Services under an invoice discounting agreement.
Stoneman and Wiles highlight the fact that they have yet to receive a signed statement of affairs (a prescribed form detailing the company's assets and liabilities) from the directors, leading them to offer an estimated financial position at 7 November 2013 in its place.
The joint administrators state that "it is understood that the directors are still preparing the SOA together" and that if received this document will be provided in the next report to creditors.
According to the joint administrators estimated financial position at 7 November, the company had book debts of £1.9m. However, only £1.4m of this is estimated to be recoverable.
This means that Bibby is expected to suffer a £113,197 shortfall and as a result there will be no money left to distribute amongst the company's unsecured creditors.
A separate note in the administrators report references an ongoing investigation and cites three sections of the Insolvency Act 1986 that the joint administrators "have a duty to investigate" in relation to "antecedent transactions".
These include: Transactions at an undervalue (section 238); Preferences (section 239); and Transactions to defraud creditors (section 423).
The report does not elaborate on this point other than to state that the joint administrators have a duty to file a report with the department for Business, Innovation and Skills regarding the conduct of the directors of The Colourhouse in the three years prior to the administration.
The Colourhouse ceased to trade prior to the administrators appointment as it had insufficient working capital to pay suppliers for the release of goods, and the firm's 85 staff, who had not been paid for the month of October, had already been sent home.
The Colourhouse made a loss of £353,463 on its £13.2m turnover for the year ended 31 December 2012 and its financial position deteriorated further in 2013, with management accounts showing a £495,296 loss on turnover of £6.1m for the six months to 30 June.
Directors of the company, including Lee Reeves, David Arkell and Randle White, blamed the company's losses on "a bad debt to the value of £130,000 in relation to CSDM", "a failed insurance claim for business interruption which had to be repaid" and suppliers cutting credit.
