LLANGOLLEN Railway's future has been cast into doubt after inviting the bank to appoint a receiver.

Amid mounting debts, the heritage railway says it has made the move as it "cannot legally continue to trade".

The company’s accounts show pre-tax losses of £330,601 in 2018, £329,175 in 2019 and £258,804 in 2020 (pre-audit).

A statement released by Llangollen Railway PLC states that a number of "significant" engineering contract disputes, all of which arose in the years prior to the current board taking over in October 2020, have "crystallised" in the last few days.

The claims against the company are said to be "compelling" and are in excess of £250,000 in total. There is said to be no prospect of meeting these liabilities, even over an extended period.

The statement reads: "As a result the balance sheet is now insolvent to the extent of £350,000 approximately, adjusting for intangible assets also. In such circumstances the company cannot legally continue to trade.

"The directors would like to acknowledge the considerable support of the Welsh Government through two significant grants, and NatWest Bank which, together with furlough payments, have enabled the company to continue to meet its commitments over recent months until now.

"The Trust’s balance sheet remains solvent and there is some cash in hand. The Trust board will need to take steps to negotiate with the receiver to try to secure the line and preserve rolling stock and infrastructure to the extent possible. It is intended to recommence operations in due course but this is dependent upon legal and regulatory approvals, including licensing, all of which will clearly take time.

"The directors very much regret the impact this will have on our staff and employees, customers, suppliers, locomotive owners and their organisations, and anyone else with connections to the Railway. It is hoped to re-hire many of our staff and employees and that it will be possible to maintain connections with many longstanding friends."

What is receivership?

Receivership, formally known as administrative receivership, is a legal process whereby a receiver is appointed by a floating charge holder, such as a bank or other lender. The receiver then "receives" any of the assets of the company that it can liquidate in order to pay back the lender.

Receivership should not be confused with administration and a receiver can only be appointed by a holder of a qualifying floating charge created before September 2003. Changes to this procedure were brought in by The Enterprise Act 2002 which promoted company rescue and saving struggling businesses.

Why would a company go into receivership?

The company requires finance for its activities and borrows from a bank (or other secured lender).

The receiver has a duty to collect the bank's debts only, they are not generally concerned with the other unsecured creditors or shareholders' exposure.

Customers who have purchased tickets in advance, including driver experiences, deposits for weddings and gift vouchers, will either be refunded (the monies have been reserved) or will hopefully be able to travel at a future date.

Where shareholders have ongoing annual ticket entitlements, these will continue to be met through the Trust.

Anyone wishing to make a claim in the receivership should contact the Railway by e-mail at commercial@llangollen-railway.co.uk and details will be passed to the receiver.

Anyone wishing to contact the Trust, please do so at the above e-mail address also.