Solvent liquidations – an end to tax clearance

PBC sign
PBC sign

Solvent liquidations - an end to tax clearance


The most frequent appointments insolvency practitioners have had in recent times are as liquidator of solvent liquidations (“MVL”). Most MVL are where a company’s purpose has drawn to a close, having paid all known liabilities, and the balance of funds are distributed to the shareholders.

In the pre-MVL preparations the company accountant will normally obtain tax clearance. Perhaps an anomaly is the MVL liquidator has also needed to obtain tax clearance before concluding the MVL. This requirement has resulted in many MVL being held open for long periods of time.

However, with effect from 6 December 2023 the requirement for tax clearance in MVL has been abolished. In a statement within their guideline, HMRC made it clear:

“Insolvency legislation requires directors to make a sworn declaration of the company’s assets and liabilities, confirming liabilities plus costs and interest can be met in full in the next 12 months. Directors need to be satisfied that the company’s liabilities, including tax liabilities, are stated accurately in order to confidently make this sworn declaration. Liquidators, company financial advisors, directors and shareholders customarily work closely together in MVL cases to ensure the company’s affairs are wound up as efficiently as possible.”

It is clear HMRC shall rely heavily on the accuracy of the declaration of solvency and the penalties available should it prove to be a false declaration. Therefore, any directors considering entering their company into MVL must ensure all potential liabilities are identified and paid (or secured) beforehand.

If you require any advice or assistance on any insolvency or solvent -related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Successful Sale via Administration

business-insolvency corporate insolvency practitioner northampton milton keynes

This year PBC were engaged to consider the restructuring of a large group of companies where the primary operations involve vehicle insurance, rescue, and repair.  Our advice has resulted in the sale, as a going concern, of the trading operations that includes safeguarding 75 jobs and protecting almost 40,000 insurance policies, that are currently in force.

PBC are dealing with the Administrations of the three principal trading subsidiaries and, whilst this has been a highly challenging assignment where the protection of almost 40,000 road users was the priority, it is indicative of the quality of the PBC Team that we successfully rescued the businesses. It is also a reflection of the recognition PBC holds when it comes to assignments of this scale.

Should you have a specific question then please send it to enquiries@pbcbusinessrecovery.co.uk.

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation on 01604 212150 (Northampton) or 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. 

Promotion Announcement

pbc-business-recovery-and-insolvency-practioners-logo

Promotion announcement

PBC are delighted to announce that both Nick Bonser and Ian Cooke accepted invitations to become directors.

Many in the business community will know Ian, who has been working within the insolvency industry for almost 30 years and after starting with the Insolvency Service, moved to an insolvency practice before bringing his knowledge and expertise to PBC in December 2021. 

On the other hand, after 35 years working for a major clearing bank, Nick joined PBC in January 2019 bringing his wealth of commercial knowledge and expertise in operational and financial matters to the company.

Director, Gary Pettit said,

“In terms of the future growth of PBC Business Recovery & Insolvency, to say I am over the moon both Nick and Ian accepted my invitation is a massive understatement.  Achievement and desire equate to reward, and both deserve their promotion. For me, this is a positive move towards reaching our longer-term goals.”

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Why should you negotiate?

Who remembers the scene in “The Life of Brian” where the trader insists the proposed buyer must haggle, rather than pay the price being requested?  That scene reminds our own Gary Pettit of what it can be like in dispute resolution matters, whether that is in relation to a financial claim or a dispute in management.

Taking legal action is a risky business for various reasons but, more so these days as the courts are demonstrating their preference to disputing parties avoiding court intervention and resolving their issues by way of alternative dispute resolution (“ADR”).  It does not matter how strong you believe your position is; the failure to engage in ADR could lead to a pyrrhic victory as you may win, but that ADR failure results in you being on the wrong end of a costs award.  In one reported case, the respondent won (as they confidently (and, as it turned out, correctly) stated in pre-court correspondence their liability amounted to £10,000) but, because they refused to entertain ADR, the court ordered them to pay some £200,000 in adverse costs!

The stance adopted by the courts is understandable.  At every stage of a litigious matter there is an opportunity to reach a negotiated settlement.  Yet, all too often a dispute deteriorates into a war of words and accusations where (particularly in management disputes) the original cause of the dispute can be forgotten.

The real danger of management disputes is, almost without fail, warring directors focus on the emotions of the dispute and forget they still owe statutory duties toward the company.  That oversight can often lead to more serious consequences for those directors, including personal liability.

As a CEDR accredited mediator, Gary Pettit of PBC says.

“A key problem with any dispute is that the parties argue.  I appreciate that sounds like I am stating the obvious, but they argue rather than listen or look at the reality of the potential consequences of the failure to consider ADR may cause.  It cannot be a coincidence that when I ask parties what it is they actually want, together with getting them to understand the potential consequences of not reaching a negotiated settlement more often than not, the dispute gets resolved.”

If you require any advice or assistance on alternative dispute resolution or any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation on 01604 212150 (Northampton),  01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Insolvency Practitioner Declares Further Dividends

kalkulation am rechner

The success of an insolvency process is often measured on the ability to realise sufficient assets in order to pay something back to creditors and two cases we are administering are meeting that goal.

In the first case, PBC are delighted to announce the payment of a further significant interim dividend of £200,000 to HM Revenue & Customs from an insolvency estate.  Combined with a payment of £500,000 in January, HMRC have now received over 35% of their debt.  With further assets to realise, it is expected that well over £1million will be returned to creditors.

The second case involves an individual who was declared bankrupt in 2019.  Realisations of two buy to let properties and an endowment policy have enabled payments of approximately 20 pence in the pound to be made to unsecured creditors.

Jamie Cochrane said, “It is always pleasing to be able to make payments to creditors as described here.  The commercial approach taken by PBC on these cases has increased the dividends we are able to pay”.

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Don’t Let Late Payments Lead To Insolvency

How much does your business rely upon cashflow?

Does that seem like an odd question to ask?  Well, if so, why is it that a recently published report showed 60% of UK businesses expect late payment of invoices will increase?  Indeed, that same report claims we spend over 71 days per annum (equating to over £27 billion in lost revenue) chasing late payments.

We have all heard the phrase, “Cash is king,” but the vicious circle of late payment across businesses damages the economy and puts businesses at risk of needing to enter into an insolvency event.

Cashflow difficulties are invariably cited as one of the most frequent causes for business failure and at PBC we have seen examples where better credit control may have resulted in them avoiding insolvency altogether.  Indeed, in a recent liquidation a creditor was bemoaning had they been more strenuous with their efforts to get paid they may not have been staring at a write off now!

At PBC we suggest all companies need to take steps to accelerate payment of sales invoices as a sales ledger does not pay the bills, payment does.  That is not always easy to accomplish and a commercial view must be adopted at times.  However, if it has proven too late and you get that dreaded notice your customer is entering into an insolvency event then contact PBC and we can advise you of your rights and even represent you to ensure your interests are protected as best as possible.

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Has your business been interrupted?

Personal-Insolvency-services-northampton-milton-keynes

How badly was your business hit by the impact of COVID-19 and the resulting Government (lockdown) measures?

We suppose the correct question ought to be, “What have you done to address the impact on your business?”  Many sought to claim under their business interruption insurance policy, only to have their claim rejected as a pandemic was not specifically covered or their policy was simply inadequate in its wording.

It has been over two years (15 January 2021) since the Supreme Court ruled in favour of the policy holders in a test case.  Since then, according to the Financial Conduct Authority, almost 38,000 policy holders have received an interim payment, at least, totalling some £1.4 billion.

Naturally any claim will turn on the wording within your policy and information suggests there are cases still finding court intervention is required and, no doubt, insurers will continue to seek avenues for denying liability albeit, in a recently reported case, the court ruled again in favour of the policy holder.

At PBC we have successfully claimed a business interruption pay out in an insolvent liquidation.  In another case, having followed our advice to appeal against the initial rejection a company’s fortunes were turned around from insolvency (with the resulting closure) to one of being solvent, while also allowing the shareholders to sell the business as a going concern.

In short, where your insurance policy includes business interruption, revisit the policy and, where in doubt, seek independent advice as you may find you are eligible to recover some of those losses suffered.

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation on 01604 212150 (Northampton 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Informal full and final settlement – it can be done!

Settlement Agreement

Informal full and final settlement – it can be done!

We were recently referred a matter, which, was slightly unusual in the current climate and below is a summary of the facts:

 

  • Company had ceased trading.
  • Only asset was cash at bank of £67,000.
  • 6 Company creditors totalled £201,000 of which £75,000 was owed to the company directors.
  • No HMRC debt and no Covid support loans.

 

The directors asked could we deal with the voluntary liquidation of the matter and of course, given the net liabilities we said we could. However, given the nature of the matter and looking to think out of the box and, provide best advice, we suggested best try an informal full and final settlement which would provide the following:

 

  • A return of 33 pence in the £ (within 28 days) in the informal offer.

or

  • 21 pence in the £ (payment not likely to be received within 1 year) if 100% of creditors did not agree with liquidation as a result.

 

We are pleased to report that agreement was reached but this was mainly due to their being no HMRC debt and no Covid support loans (HMRC and liabilities in respect of Covid support loans are unable to informally agree this sort of offer) with the creditors involved being able to make a commercial decision.

 

Whilst it would have been easy for us to deal with the liquidation, we always to look to provide the best advice which, we believe, is certainly in evidence here.

 

If you require any advice on an insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

 

What is the value of a name?

How often does the company name become the brand that your customers know?  Indeed, if you were to assess the value of the company assets, what value do you consider placing on that brand in a going concern scenario?

Taking the above into consideration, what then happens if the company (for any reason) has to go into an insolvent liquidation and, because you see a benefit in saving the business, you wish to set up a new company, using that brand (ie company name)?

Sections 216 & 217 Insolvency Act 1986 (“the sections”) provide that when a company enters into an insolvent liquidation then a person who was director (whether de jure, de facto or “Shadow”) of that company may not re-use that “Prohibited name.  Section 216 imposes a strict liability criminal offence while section 217 creates a personal (civil) liability on those who breach these provisions.  Placing the new company under the directorship of your spouse or relative does not circumvent these strict provisions either as a person who knows at the time there is a contravention of the prohibited name provisions can also be held personally liable.

The Association of Business Recovery Professionals recently lobbied the Government Insolvency Service for proposed changes to these provisions, to include companies entering into administration and those companies where a simple application has been made for their striking off. 

The aim of the sections is to prevent “Phoenix” companies from causing a disadvantage to creditors where directors seek to offload the company debt and enjoy a freedom to trade going forward.  When you compare the corporate figure for 2021/22 (524,046 strike offs versus 22,395 insolvent liquidations) then it is understandable why the current provisions require some reform in order to protect creditors.

So, what can you do if faced with this scenario?

Contravention of the above provisions cannot be retrospectively remedied so seek advice at the earliest possible time. 

Secondly, there are exceptions that can be relied upon.  However, given the strict liability status of these sections, any error in following those exceptions can lead to a contravention.

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation on 01604 212150 or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Another satisfied customer

PBC received this testimonial from a very satisfied new client about a  matter we advised on. As Insolvency Practitioners we often deal with both solvent and insolvent liquidations, but we are also very well placed to help people look to avoid our formal services which is what happened below.  All initial meetings are free of charge and completely confidential and we have offices in Northampton and Milton Keynes.

“We were referred to Ian at PBC via our accountants to seek advice on an ongoing shareholder’s dispute. Ian met with us at our earliest convenience at his Northampton office. 

The support and knowledge given  was extremely professional and invaluable. We left the meeting with clarity and a clear plan on how to proceed. 

We wouldn’t hesitate using PBC again if ever needed.’

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation on 01604 212150 or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information