Staffing agency Transline given stay of execution amid rescue talks

The controversial employment agency whose relationship with Sports Direct sparked a political outcry was handed a lifeline on Thursday amid last-ditch rescue talks with a mystery investor.

Sky News has learnt that Transline Group paid more than £1m last year to directors in the form of dividends, loans and a transfer of shares - even as it was facing a funding squeeze after suffering a seven-figure annual loss.

Transline, which was fiercely criticised over working practices at facilities used by Asos (LSE: ASC.L - news) and Mike Ashley's Sports Direct, lost £1.2m in 2016, according to a document seen by Sky News.

Last week, the company said it was preparing to appoint insolvency practitioners by filing a formal notice that sources said was due to expire at midnight on Thursday.

It said just hours before that deadline, however, that it would extend that period for a further 10 days.

"We have been involved in a number of negotiations, and are now at an advanced stage with one of the parties we have engaged with," a company statement said.

"Given this progress, we have filed a fresh extension of our NOI [notice of intention to appoint administrators], which will extend this period for a further 10 days.

"We have a clear timeline to complete the agreement with the party in question within the 10 days."

A spokesman said the company would "continue to keep our customers and employees regularly updated".

The identity of the new backer was unclear, although sources said that a number of specialist turnaround investors had been approached in recent weeks.

The latest development does not mean that Transline is certain to avoid insolvency, but gives the directors additional breathing space to negotiate a deal.

News of the temporary reprieve comes after the online fashion retailer Asos terminated its relationship with Transline earlier this week.

Transline manages a temporary workforce estimated by people close to the company at approximately 11,000.

The group has blamed "tighter margins" for its financial difficulties and has told prospective investors that it required new funding of just over £6m.

In a document sent to potential backers, it said that £750,000 had been paid to Colin Beasley - who now holds 10% of the company - "in respect of his shareholding", while there were £308,000 in dividends paid and increases in directors' loan accounts.

A filing at Companies House shows that Mr Beasley - who is the father of co-founder Paul Beasley - resigned as a director last month.

A further £624,000 was paid to HM Revenue and Customs in relation to National Minimum Wage fines and Accelerated Payment Notices, according to the document.

Transline was founded in 1989, and was virtually invisible until relatively recently.

The emergence of working practices at Sports Direct's warehouse at Shirebrook in Derbyshire, where a 'six strikes' policy left workers fearing for their jobs if they took 'excessive' toilet breaks, placed it firmly in MPs (BSE: MPSLTD.BO - news) ' cross-hairs.

As well as the loss of its Asos contract, it has parted company with Amazon, another of its biggest customers.

Transline's co-founders - Paul Beasley and Jon Taylor - each own 42.5% of the company, while another executive, Mark Elms, holds 5%, according to City sources.