Debt recovery could take years, say ISG administrators after clawing back £19m

Administrators for ISG have so far clawed back £19.2m from the collapsed firm’s debtors.

In their latest progress report filed to Companies House, EY’s Timothy Vance and Alan Hudson revealed they had already recovered more than had been expected when the contractor went into administration last September.

At that time, the company was working on a total of 723 projects, of which 539 were finished projects where practical completion had been achieved and a retention balance was outstanding.

The directors’ statement of affairs estimated that there was a potential  £11.4m of realisable value from what the company was owed on these schemes.

However, during the first six months of the process, the administrators “achieved a number of full settlements of outstanding sums from certain contracts”, enabling them to surpass the number predicted in the statement of affairs.

A number of these recoveries had “involved legal disputes”, according to administrators.

But the money so far recovered is far less than the £241.7m book value of what the company is owed.

EY refused to provide an estimate of future recoveries “in order not to prejudice the outcome fo the continuing debt collection process”.

It said the recovery of debtor balances was an “inherently complex” area “due to the potential for significant contractual counter-claims”, and that the process could take “some years”.

“While the joint administrators are confident of achieving further significant recoveries, the full quantum and timing remains uncertain and is likely to require legal action in some cases,” they said.

>> Also read: Downfall of ISG: how and why it collapsed 

The report also revealed that around 1,650 protective award claims had been made against the company by former employees. These are compensation payments when an employer fails to properly consult with employees during a collective redundancy process.

The joint administrators were required to make the vast majority of the companies’ 2,400 staff redundant when it was appointed, with just 216 people kept on to assist with the wind-down.

Individual protective award claims can be brought by more than one person, so the total number of former staff bringing cases to the employment tribunal could be even higher. The tribunal can award up to £5,600 in cases where the former employer is insolvent, meaning the total bill could be more than £9m if all claims are successful.

EY’s latest update also revealed the challenges the administrators faced in decommissioning ISG’s IT systems. They required assistance from a specialist data team due to the “high complexity of the group’s IT architecture and infrastructure and the size of the companies’ electronic data”.

The data preservation process was completed by 28 February this year, at which point the IT infrastructure was decommissioned.