The Breathing Space

Women looking into a piggy bank

 

And……breathe

 

How much is the increasing cost of living impacting on you?  With utility, fuel and general household shopping costs increasing, the monthly domestic budget is being challenged, with more people exposed to financial risk.

 

Prior to the pandemic, the choices for individuals suffering debt problems were primarily, individual voluntary arrangements (“IVA”), bankruptcy, debt management plans or debt relief orders.  While that appeared to provide a degree of choice, issues surrounding the likes of debt versus assets could often restrict choice.  The common features, though, were often creditor pressure (with the associated demands) and stress imposed on the debtor.

 

In May 2021 the Government launched the Debt Respite Scheme or, as it is more commonly known as, the Breathing Space.  The Breathing Space scheme is designed to provide just that, some time away from creditor pressures while a debtor tries to reach a solution for resolving their situation.  In addition, specific procedures were set up for those who have medical evidence to confirm they are receiving mental health crisis treatment.

 

A Breathing Space order provides a debtor with 60 days of protection while mental health applications provide for protection over the duration of the crisis treatment plus a further 30 days.  Government statistics suggest a debtor who is subject to a Breathing Space order has over 3 times more chance of entering into a debt solution than had they not been afforded the time to sort out their affairs and by April 2022 some 58,000 applications had been registered.  This included over 900 applications where the debtor was receiving mental health crisis treatment.

 

These applications are made on a debtor’s behalf by the likes of the Citizens Advice Bureau, Council monetary advice centres or Step Change.  However, if the debt solution is to consider entering into an IVA then you will require an insolvency practitioner.

 

To supplement the Breathing Space legislation, consultation is currently ongoing for the introduction of the Statutory Debt Repayment Plan (“SDRP”).  Unlike a debt management plan, this will be a regulated and structured scheme that provides up to ten years for a debtor to repay their debt.  Unlike some commentary and social media adverts we have seen, the Government are NOT promoting any scheme that sees 85% of your debt written off.  The SDRP is designed for repaying the entire unsecured debt (e.g loans, credit cards etc) so should not be entered into lightly.

 

At PBC we take the view the proposed SDRP provides a solution for people who fall between the current formal options available.  It may also assist those where an IVA is more appropriate but creditors’ general lack of understanding (of insolvency) or a simple reluctance to support an alternative to bankruptcy, invariably forces a debtor into bankruptcy, which as is proved in the majority of cases, the “Poor” alternative.

 

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

Bounce-back loan misconceptions

 

It seems that every other press release from the Insolvency Service at the moment announces more sanctions against individuals who have abused the Covid support schemes and in particular the Bounce-Back Loan scheme (“BBL”).  For example the latest included a director who applied for a BBL with three different lenders far exceeding the amount he was entitled to and an individual who spent £13,000 of the loan he received on various gambling sites.

 

One common misconception around BBLs is the position of personal liability.  It is true to say there is no personal liability for directors should the business fail, and the loan is not repaid.  However, something we are seeing at PBC is where the funds received from the BBL have been paid to the director, thereby creating a loan between the company and the director.  This loan is repayable.

 

If a director is concerned they may not be able to meet the BBL repayments, or if that has already occurred, directors should be aware this could constitute evidence of the company’s insolvency as it is not able to meet its debts as they fall due.  Upon reaching this point, the director’s legal duties switch from the shareholders to protection of the creditors as a whole.  It is at this point, at least, PBC recommend seeking advice.  Directors should not be wary about seeking advice (particularly if they have an adverse loan) as failing to do so may lead to the position becoming worse should liquidation occur at a later stage, as well as leaving them vulnerable to stepping on the “elephant traps” as we have previously mentioned here – https://www.pbcbusinessrecovery.co.uk/beware-the-elephant-traps/ .

 

Should you or your business have an issue with repaying a BBL (or for any other reason) then please contact a member of the Team at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to info@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk

 

PBC Charity Quiz

Last night, Wednesday 11 May 2022, 18 teams of business professionals and the like took part in their very own episode of ‘The Chase’ otherwise known as the PBC Charity Quiz! All attendees enjoyed a burger, the odd pint of something cold and a few belly chuckles along the way!

PBC’s chosen charity is currently ‘The Lighthouse Centre’ which provides holistic treatments to patients with long-term medical conditions or cancers, supporting their quality of life at a time of vulnerability. Gemma Dearsley, the charities founder is well known around Northamptonshire and we are proud to support her and the work she does. I am pleased to announce the night raised in excess of £1,500 for The Lighthouse Centre which will be greatly appreciated.

The overall winners were DFA Law, a hugely deserved achievement with some tough questions requiring a range of knowledge, particularly about boy band members and children’s TV characters! Well done to the team. To avoid any (possible) embarrassment we will not publish the overall scoring, but individual teams are welcome to contact us if they want to satisfy their curiosity over their results.

Finally, a big thank you to the team at PBC – Lisa Parker (organiser and general good egg), Gary Pettit (boss) , Jamie Cochrane (quiz master), Ian Cooke (main party doner), Nick Bonser (caterer), Natasha Pink (chief score counter), Claire Goodacre (entertainer), Jenny Gent (collections agent 1), Nicole Anderson (chief marker) and Grace Carter-Hands (collections agent 2) for their hard work in making the event run smoothly! Remember, we’re not just good at quizzes – we also give good advice

#quiz #thelighthousecentre #charity #charityfundraising #charitysupport

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Why you should seek early advice

figures

It is not often that insolvency makes the headlines, but recent days have seen the sentencing of Boris Becker to two and a half years in prison. As Julie Andrews once sung, let’s start at the very beginning.

 

Boris Becker was adjudged bankrupt in 2017 following the non-payment of a £3million loan relating to a property in Mallorca. Following the making of the order, an insolvency practitioner was appointed trustee in bankruptcy with the duty of realising the assets and the Official Receiver had the responsibility of investigating his affairs. This work led to claims of assets not being declared (including the trophies for winning Wimbledon and an Olympic medal), as well as debts being hidden.

 

In 2018, in a surreal moment, Boris Becker declared diplomatic immunity against further attempts to pursue him over the debt. His lawyers said he was a sport and culture attaché of the Central African Republic, a claim subsequently dropped.

 

He was found guilty last week of transferring hundreds of thousands of pounds from his business account after his bankruptcy, failing to declare a property and an associated loan in Germany as well as concealing €825,000 of debt.

 

Whilst it is open to debate as to whether the sentence handed out is more severe or not (given the high-profile nature of the case) it does serve as a reminder of the powers in the Insolvency Act. The story of Boris Becker’s fall from one of the best tennis players in the world to a prison inmate also serves as a lesson to others who believe they can avoid disclosure. His finances were impacted through  a combination of a reduction in earnings, divorce and child maintenance payments but his outgoings seem unchanged (for example he mentioned a £22,000 per month rent bill for a London house).

 

There are many reasons why individuals and directors alike will try and “Beat the system”.  Experiencing financial difficulties creates stress and can lead to irrational decisions that may, ultimately lead to outcomes similar to that suffered by Mr Becker.  The key to avoiding these issues is to seek early advice.

 

Should you or your business have an issue of financial difficulties following a shock (or for any other reason) then please contact a member of the Team at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to info@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk

What is a company CCJ?

What is a company CCJ

 

A county court judgment (“CCJ”) is a court order used to try and force a company to pay a business debt. The creditor can make an application for a CCJ once they have tried and failed with alternative methods of debt collection. The issuing of a CCJ can be a sign that the company in receipt of the CCJ, may be having financial problems and is struggling to pay its debts as and when they fall due but, more commonly, a CCJ is received because the claim has been disputed or the recipient disagrees with the sum being claimed.

 

Once a CCJ has been registered it is available in the public domain and, unfortunately, this is when “Ambulance Chasing” insolvency firms or their subcontracted sales teams look to make direct contact with the directors of the company offering them their services to assist and help. The contact is generally in the form of numerous unsolicited phone calls or even direct letters to the company, mentioning the CCJ. Clearly, these phone calls and letters can be intercepted by employees of the company, unaware that financial issues may be on the horizon, which can also have a damaging effect on the company.

 

If you or one of your clients receive a CCJ and it is a result of real financial pressures, then I am afraid you/they will be “Ambulanced Chased”. Here at PBC Business Recovery and Insolvency we would never hound the company directly, and we would recommend that the director(s) take immediate advice. The company’s professional advisors will no doubt know and trust an insolvency firm to provide the right advice for their client and not “fuel for the Ambulance”.

 

Should you have an insolvency-related issue then please contact a member of the highly experienced team at PBC Business Recovery & Insolvency who will be more than willing to provide you with guidance and advice that will be right for you and your circumstances – (Northampton office – (01604) 212150) or (Bedford office – (01234) 834886) .

 

Pull a rabbit out of a hat – yes it can be done!

Pull a rabbit out of a hat – yes it can be done!

 

PBC Business Recovery and Insolvency handled the liquidation of an Ex-Serviceman’s club in December 2019. In compulsory liquidation it is very rare for members to receive any financial return. In this instance we are pleased to report that recently, not only did all class of creditors receive payment in full plus statutory interest – total paid was £346,278, each of the 230 club members at the time of liquidation received £1,000 each from surplus funds held.

 

Whilst returning funds to members in insolvency proceedings is rare, we consistently return funds to creditors in insolvency proceedings. Should you have an insolvency-related issue then please contact a member of the team at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office).

Who owns future sales?

calculator

Who owns future sales?

 

Occasionally there are sound commercial reasons for taking the business from an existing insolvent company and moving it into a new entity (commonly referred to as “Phoenix liquidation”).   When this occurs, the most common feature surrounds completion of existing orders and can future orders be passed directly to the new company?

Directors are under statutory duties that include protecting the company assets.  However, when a company ceases to trade, due to insolvency, the obvious argument is that the company is unable to fulfil orders, both those in progress and new orders.

In general, completing existing orders through a new company without providing some value back to the old company could constitute a breach of duty.

A defence to such a breach is often the director is the business and without the director there was no business in the first instance.  In many cases this argument fails, both in company law and because the law considers title in the property (orders) rests with the company.  New orders that were secured by the company are considered likewise.

However, the court of appeal ruled in Reynolds -v- Caroline Stanbury [2021] EWHC 2506(Ch) that putting future sales opportunities through an alternative business did not amount to an unlawful removal of business.  The sales opportunities were not pre-existing corporate assets.

As with all law reports, the Reynolds case was decided based on the surrounding facts, unique to that case.  The respondent was a professional personal shopper for the seriously wealthy and was, for all intents and purposes a sole trader.  Even a key witness (a customer) believed the respondent traded as a sole trader and was completely unaware the company existed.

Whenever a company needs to cease trading, the question of existing/ongoing orders is discussed regularly, particularly when there is a potential for the business to continue under a new entity.  In every case the directors need to consider their statutory duties and before transferring orders, seek independent advice.

Should you have an insolvency-related issue then please contact a member of the team at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may access our website at www.pbcbusinessrecovery.co.uk.

Winding-up petitions – back to normal!

Signing a contract

The restrictions implemented by the Corporate Insolvency and Governance Act 2020 in March 2020 on the issuing of statutory demands and winding-up petitions has now fully come to an end as from 1 April 2022.

Creditors are now free to issue winding-up petitions against companies who are unable to pay sums owed with monetary petition limit back to £750 instead of £10,000.

It is expected that there will be a substantial number of winding-up petitions going forward with creditors seeking to recover funds owed.

If you or a client have received a winding-up petition or are being threatened with the serving of a winding-up petition, then please contact a member of the Team at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office).

Director Duties

You need a licence to drive

 

It is often said, to drive a vehicle on the roads you first need to pass a test, which demonstrates you understand the laws of the road.  You also receive a driving licence as evidence of passing.  This goes with many professions where you need to achieve certain qualifications and probably receive a certificate as evidence.  However, to be a director of a company, it is a simple case of filling in a form and filing that at Companies House with no question of whether you understand the statutory burden that office imposes.

 

As an employee you will either gain knowledge or acquire qualifications and you are employed for that service under a contract of employment.  However, add the label of “Director” to that employment and you immediately become a company officer that carries duties beyond a simple employment contract.

 

The principal duties of a director are laid down in the Companies Act 2006 and generally state a director shall:

 

  • Act within their powers
  • Promote the success of the company
  • Exercise independent judgment
  • Exercise reasonable care, skill and diligence
  • Avoid conflicts of interest.

 

In most cases, the true implications of these duties may never consciously arise.  But what if your company is experiencing financial difficulties?  All too often directors ask can I pay this person, or can I repay a loan where I have given a personal guarantee?  Alternatively, directors may decide to continue trading in the hope that something good is around the corner.  Unfortunately, it is often something that is far from good that awaits around that corner and that can occasionally lead to personal liability and/or director disqualification.

 

In any circumstances where a company requires restructuring or, is facing closure, it is always the directors who are at the end of the criticism, whether that is from The Insolvency Service or creditors who face debt write off.  It can be of little surprise that directors who have taken advice from an early stage and follow that advice find the criticism (and other ramifications) minimised, or even extinguished.

 

Should you have an issue of financial difficulties then please contact a member of the Team at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to info@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk