Landmark legal proceedings are underway to rescue ‘tech for good’ business GoodBox from administration, save £4.5 million invested by the public purse and help to secure the future fundraising of thousands of charities.
At a hearing at Leeds High Court on Wednesday, NGI Systems, a tech vendor of GoodBox, led by Tibor Barna, proposed a US-style Chapter 11 restructuring of GoodBox. Although Barna co-founded GoodBox in 2016 and was its chief technology officer, he was never a director of the company.
Following detailed scrutiny by the court, the rescue package was deemed to be credible and appropriate, triggering its decision to put it to a vote of existing shareholders and creditors on January 10th 2023.
The new UK legislation being used, the Corporate Governance and Insolvency Act of 2020, allows for the court to impose a cross-class cram-down on dissenting creditors and shareholders if it considers the proposed plan to be in the best interest of the company.
Failure of the rescue bid will result in a fire sale of assets that will wipe out all creditors and shareholders of GoodBox, including the UK taxpayer.
GoodBox developed and delivered award-winning technology that allows contactless and digital donations to charities. In the past six years GoodBox has secured 2,200 not-for-profit clients including the Natural History Museum, The Church of England, British Red Cross and the Science Museum. Its clients have raised close to £20m via GoodBox technology, with more than 3.2m donations processed.
NGI Systems’ proposed restructuring would ultimately reduce the debt burden of GoodBox from £10m to being debt free in three years, while involving 18 existing angel investors of GoodBox providing new funding and installing a new independent board of directors from day one.
The £4.5m the plan aims to save for the taxpayer forms half of £9m in convertible debt finance secured by GoodBox in January 2021 from the UK Government Future Fund, a scheme designed to support innovative UK businesses during the pandemic and operated by the British Business Bank on behalf of the Government. The Bank would retain equity in the company and a share of future revenue as intended.
This is the second court ruling which has gone in the favour of NGI Systems’ rescue package. At an earlier hearing on December 2nd, the administrators of GoodBox were denied permission by the court to sell the business ahead of the hearing on December 21st. This paved the way for the latest decision which puts the future of the company in the hands of creditors and shareholders.
NGI Systems welcomed the decision of the court. “We are naturally very pleased the court has given the green light for our rescue package to be put to a vote of shareholders and creditors,” said Barna.
“This is a significant step forward for our plan to save the company and the angel investors we are working with, stand ready to take the company forward and enable it to fulfil its true potential.”
Financial consequences of the pandemic diminishing funds and the failure of GoodBox shareholders, board of directors and the so-called ‘lead lender’ of the Future Fund investment failing to agree on a way forward, caused the business to become insolvent and consequently enter administration on 28th June 2022.
A petition for the administration was granted by the courts to NGI Systems, a tech consultancy and key supplier of GoodBox since its inception and controlled by Tibor, with Jeremy Frost and Stephen Wadsted of Frost Group Limited appointed by the court as administrators.
The Financial Conduct Authority (FCA) allowed GoodBox to continue trading while in administration but not to take on new clients.
NGI Systems has been funding the losses of GoodBox while in administration to allow it to continue trading and support its clients.
NGI Systems has secured the support of a group of angel investors, who are also existing shareholders of GoodBox, to fund the costs of the administration and the hefty legal expenses of proposing the rescue plan.
If the restructuring plan is sanctioned by the court, these angel investors will become majority owners of GoodBox, with NGI Systems acting as a facilitator and minority stakeholder.
According to court filings, following the rescue plan, Canadian donation solutions provider TipTap has expressed its intention to refinance GoodBox with £1.5m as part of a partnership bringing its product to the UK and allowing GoodBox products to enter the US market.
According to NGI Systems, there are also merger discussions ongoing between GoodBox and online charity shop GiveAsYouLive.com, which is backed by Geoff Squire, who established tech giant Oracle in the UK. Squire is also backing the proposed rescue plan for GoodBox.