Stokes Furniture Bankruptcy Sale
Old Meets New Furniture Ltd. (“OMNF”) was operating as Stokes Quality Furniture in the Victoria and Nanaimo areas since 1974, retailing furniture. However, a downturn in the economy led to declining sales over the last few years and ultimately to the closure of the Nanaimo store. OMNF found that it could no longer generate sufficient sales in the Victoria location alone to cover operating expenses. Related party funds from the shareholder in the amount of $ 45,000 were infused into the operations, however, it remained unprofitable.
In an attempt to reduce monthly operating expenses, the company entered negotiations with the landlord to reduce the monthly rent with the intent of staying at the Victoria location until August 2014 which would have been at the expiration of the current rental agreement. However, an agreement in reduction in the rent could not be reached and, with continued declining sales, even with the reduction in inventory levels did not generate sufficient sales to fund needed purchases, maintain debt payments, and pay operating expenses.
OMNF became aware that a secured charge had been registered against all of the assets owned by the company by the Minister of Finance for un-remitted PST with their intent of using a bailiff to secure the assets in payment of the outstanding tax debt. The principle of the company then realized that sales were not sufficient to meet all obligations until the end of the lease, and subsequently felt that the only alternative was to assign the company into bankruptcy.