Hack-smacked Alphadex bought by iRack Ltd ... or is that Networks Ltd?

'Directors are perfectly entitled to set up a new company and that company can then bid for the business'

“Alphadex is a fundamentally sound business with an excellent product range, but a recent sustained cyber-attack on the company servers and issues ultimately beyond its control meant a number of key customers were unfortunately lost, hitting the company disproportionately hard," Jason Elliott, partner at Cowgill Holloway Business Recovery, said.

“After a short period of marketing we were able to generate several expressions of interest and three firm offers which ultimately resulted in a successful sale of the business.

"Due to the sector in which it operates, continuity of service is of paramount importance and by ensuring that there was no disruption during the marketing period we were able to maintain goodwill and preserve the value to any prospective purchasers. We were particularly pleased that we were able to save all 21 jobs."

Denise Fawcett, specialist insolvency partner at Pitmans law firm in London, said that it is not unusual for the management team of a company to buy a business back out of administration.

"Directors are perfectly entitled to set up a new company and that company can then bid for the business," she explained, adding that it was up to the administrator to assess all bids and ensure creditors were getting the best available deal.

She said that the process could be used to help directors out of a sticky situation, but that reputable administrators would not be swayed by what a director wants if it was not in the best interest of creditors.

When it comes to former directors, issues can arise when they've resigned their post but remain behind the scenes, pulling the strings as a "shadow director". Being a shadow director is not in itself illegal, according to HMRC's Insolvency Manual, unless the director has been disqualified from running a company.

"But the existence of a shadow director is a risk indicator. It raises the suspicion that the shadow director is attempting to conceal something by managing the company but not being listed as one of its directors," the manual says.

"For many purposes shadow directors are subject to the same rules and risk of personal liability as registered directors. The problem is proving that someone is a shadow director," Fawcett pointed out.

Administrators are also obliged to give the creditors the full facts about the sale of a company in administration, according to insolvency practitioners' rules, including whether the buyer is connected to the old firm. Cowgill Holloway told creditors that iRack Ltd was an "unrelated third party". ®