Troubled components distributor Memsolve has admitted that it owes around #4 million to its creditors and that it may be forced out of business unless it can overcome crippling cash flow problems.
Last week the company was forced to lay off around 20 of its 65 staff and has been unable to pay its bills - some of its suppliers have complained that they had received cheques which then bounced. The troubled company said it has faced cash flow problems since a Customs & Excise raid last November.
Memsolve, based in Widnes, Lancashire, is still trading but venture capitalists Northern Venture Managers and Natwest - the distributor's bank - are said to be considering their next move.
Chris Walmsley, Memsolve sales and marketing manager, said the next 24 hours would be critical for the company. "I don't know for definite. It's in the hands of the bank and venture capitalists. We could either be rescued or go into receivership," he said.
Eddie Pacey, Ideal Hardware credit manager, could offer little solace for Memsolve: "We have considered the company to be a high risk for some time, especially since the VAT raid. The position is now so far advanced that some form of insolvency seems inevitable."
Walmsley disagreed that there was no hope. He said there was a rescue package, but said it would depend on whether creditors were willing to enter into an arrangement which would buy the company precious time.
This morning, Memsolve was still taking orders, but is unable to buy anything from suppliers. Walmsley said: "We've had to put the brakes on."
On 4 November, HM Customs & Excise, accompanied by Intel and Microsoft representatives, raided Memsolve's premises.
According to the company, the raid was connected with a VAT fraud, allegedly committed by one of its British based suppliers. It came three weeks after Customs officials raided a computer parts supplier - no longer trading - in the north west of England.
Shortly after the November raid, Memsolve's debt insurer, Trade Indemnity, pulled any new cover for creditors. It was reinstated at a reduced rate shortly afterwards.
However, the insurers have again withdrawn the cover.
Walmsley said: "We had an absolutely fantastic business. It's been ruined."
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