Everyone at PBC would like to offer their congratulations to Jenny, who married Matt on 2 June, and wish them a long and successful marriage.
Jenny’s new email address is jennygent@pbcbusinessrecovery.co.uk
Are CVAs viable?
How many High Street retailers can you think of whose name has been confined to the annals of history? I can think of 15 and that excludes the latest to fall victim, being BHS and Austin Reed.
BHS entered into a company voluntary arrangement (“CVA”) with a 95% creditor approval. It included landlords of 87 (out of 164) stores agreeing to a 75% cut in rentals as a compromise for helping the retailer survive. So why did the CVA fail? It may surprise readers to learn BHS was the eighth High Street retailer to attempt entering into a CVA as a form of restructuring. However, only two of them are succeeding. A big problem for businesses of this scale is the enormous sums of money generally employed. For example, in the case of BHS they needed to raise £100 million to cover wages and trading costs when as a rule suppliers tighten up credit and supply terms post CVA approval.
CVAs were designed as a tool for restructuring businesses that were enduring short term cash flow issues. Behind it there should always be a core viable business where some operational changes may turn the company fortunes around. The benefits to creditors include a better return than alternative insolvency procedures and, in most cases, they preserve a customer going forward.
Provided the CVA proposals are realistic the principal risks to a successful CVA are the impact of unforeseen issues (such as a detrimental impact on the field of trade or adverse weather where the company operates in logistics, for example) and creditors imposing onerous demands that will doom the CVA to fail. Many times creditors will simply reject perfectly good CVA proposals due to a lack of understanding. That is not a criticism of the voting creditors; merely a fact they are being asked to accept not being paid in the short term, the payment they receive is likely to only be part payment and would you also continue trading with the insolvent company as if nothing happened. The real point is accept the lesser sum offered or face the reality of 100% write-off if an alternative route is demanded.
At PBC we have assisted numerous companies restructure and survive using a CVA as the vehicle. Sometimes it can be a simple case of we can see the wood for the trees. The more successful outcomes arise where directors/partners seek advice at an early stage before the creditors’ antagonism reaches uncompromising levels where biting off your nose to spite your face may prevail in their voting attitude.
Oh, for those readers still wondering who the 15 retailers I could think of they are……. available on request!
At PBC Business Recovery and Insolvency we can advise you whether a CVA is appropriate. If appropriate, we will firstly assist you with the preparation of the proposal and then act as nominee and convene the meeting of creditors. Should the proposal be approved, we will then act as supervisor.
PBC Business Recovery & Insolvency offers a free one hour consultation to discuss your situation and the possible options available. Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.
PBC Business Recovery & Insolvency proudly sponsor the SME Northamptonshire Business Awards 2016
PBC Business Recovery & Insolvency is sponsoring the sought after Young Business Person of the Year category at this year’s inaugural SME Northamptonshire Business Awards.Continue reading
Did you know PBC can offer mediation services?
The philosophy behind Alternative Dispute Resolution is to encourage parties to consider resolution of their dispute by way of mediation rather than the (often) costly route of court intervention.
Insolvency is a highly specialised field that is constantly exposed to legal argument. At PBC, we say a dispute is most likely to be resolved if the mediator is equally specialised. As a long-established and well-known appointment-taking insolvency practitioner, Gary Pettit is also an accredited mediator with CEDR and now offers to assist parties resolving dispute by way of mediation.
Indeed, Gary has recently received commendation from the chief executive of one of the country’s leading providers of finance to insolvency practitioners who said “I can recommend Gary very highly. He did a super and well balanced job on one of our cases recently. He is now on our shortlist for future cases”.
Should you be involved in an insolvency-related dispute where mediation has been (or is being) considered then we at PBC fail to see how the only known mediator who is also a current appointment-taking insolvency practitioner cannot be the right person for you.
For more information, see here or call Gary on 01604 212150.
The most common reasons why businesses fail
When you are starting a business, it almost seems counterintuitive to focus on failure, but with research showing that over half of small and medium-sized enterprises don’t survive more than five years, it stands to reason that if you are aware of the most common downfalls, you’ll be more likely to avoid them.
PBC appointed joint administrators of The Castle (Wellingborough) Ltd
The Castle (Wellingborough) Limited, operators of The Castle Theatre in Wellingborough, entered into administration on Wednesday 13 April 2016, with Gary Pettit and Gavin Bates of PBC being appointed joint administrators.
The directors were compelled to act in the best interests of the company’s creditors following the recent announcement by Wellingborough Council that they had terminated the contract to operate The Castle Theatre. Legal advice is being sought on this matter and nothing further can be added at this time regarding the administration and its circumstances.
All performances and other community activities will, as far as possible, continue to go ahead and staff and performers will be paid by the administrator through ticket sales and merchandise revenue. Gary Pettit, joint administrator, commented “This is very sad news for the Wellingborough community and, whilst we are working hard to find a solution so that The Castle can remain a focus in Wellingborough, we would encourage you all to continue to support the theatre.”
The full level of debt is still being quantified, however it is known that the company inherited a £500,000 pension shortfall and this is their biggest outstanding liability. All known creditors will be notified of the administration and registration procedure within the next 5 working days and any creditors who have not received information from PBC Business Recovery & Insolvency, the appointed administrators, by Thursday 21st April should telephone 01604 212150.
There are 38 staff involved at The Castle Theatre and, although there are no immediate plans for redundancies, sadly this cannot be guaranteed.
A look at Alternative Finance
If you need a business loan and have been turned down by traditional lenders and mainstream financial services providers you may feel despondent, but it is important to remember there are other options to explore, should you find yourself in this position.
The alternative finance market is diverse and growing and has an important role to play in funding small businesses. Research from the Cambridge Centre for Alternative Finance and Nesta shows that in 2015 the market grew by 84% and facilitated £3.2bn in investments, loans and donations. The sector is more flexible and can often offer better terms for your business.
Some of the options available include:
Peer-to-Peer Lending
These online services match individual lenders or groups of lenders directly with borrowers. The main advantage of this approach is that they can offer lower interest rates than a high street bank or other financial institution due to the low operating costs that result from being internet-based. There is also often more flexibility on repayment terms. However, it is important to note that any issues such as defaulting on payment will incur charges and will be noted on your credit file, potentially making it harder to secure credit in the future.
Invoice trading
If you are an SME with a cashflow issue, invoice trading can be a way of resolving the problem. You ‘auction’ your outstanding invoices online and sell them individually or in bundles to the bidders who offer the most competitive price to advance you the money. When your customer then pays the invoice you have to refund the investor with the advance, plus fees.
Equity crowd funding
This form of finance is similar to peer-to-peer lending in that you advertise your business via an online platform to potential investors. Interested individuals then pool funds to become equity stakeholders, often in early stage companies where the opportunities, and risks, are the greatest. There are a number of well-established platforms including Kickstarter, Seedrs and Crowdcube.
Business Angels
Business Angels are most commonly high net-worth individuals who invest in early-stage or high growth businesses. They will usually have extensive knowledge of growing a business and, as well as investing their own money in return for shares, will as a mentor and advisor.
Whether you need to fund growth, invest in new products or take on a new opportunity alternative finance may help you stay in business and grow. There are people out there who want to lend to SMEs. You need to identify the most appropriate route for you and then work hard to secure their support.
PBC welcome Sam to the firm
PBC Business Recovery and Insolvency are delighted to welcome Sam to the firm on a permanent basis.
Having initially joined in July 2015 on a temporary contract to assist with the production of new templates and other IT demands, Sam impressed with his hard work and was therefore offered a permanent job. Sam will be continuing with the template work as well as assisting the team on the case work.
Congratulations Sam!
Can I go bankrupt please?
Every year there are literally thousands of people confronted with debt that reaches a point of being unmanageable, whether through bad luck, an inability to foresee the problem that was looming or, in some cases, other reasons. Until recently, these unfortunate people have been able to petition the court for their own bankruptcy, provided they could afford to pay the petition costs. This is what we refer to as a “Debtors’ own petition”.
However, from 6 April 2016, instead of going to court, individuals wanting to make themselves bankrupt will have to apply on line through a portal on the Government website at GOV.UK. The application fee is £130 (which is £50 lower than the original petition cost) and this can also be paid online. If you pay online the applicant will even be allowed to pay the cost by instalments.
The application will be considered by an adjudicator within the Insolvency Service who must determine whether a bankruptcy order is made within 28 days of the application being submitted. This period could be extended by up to a further 14 days if the adjudicator requires further information before being able to determine the application.
So, what happens on adjudication? There are two options for the adjudicator, namely:
- Agree a bankruptcy order should be made. Upon making this decision the adjudication/application papers are passed over to the Official Receiver who will take all appropriate steps to administer the bankruptcy estate from thereon; or
- The application is rejected. Although it has not been made clear why an application would be rejected, it can be assumed grounds for rejection will include a view an alternative method of addressing the debt problem is better than bankruptcy. This will include procedures such as voluntary arrangements or debt relief orders. However, if rejected, the debtor may apply within 14 days of being notified for the adjudication to be reviewed. Should the review uphold the rejection then the debtor may within 28 days of the review determination apply to court who may make an order they see fit, which may include making a bankruptcy order or dismissing the application.
These changes only relate to debtors’ own petitions. A creditor who is owed in excess of £5,000 may still proceed to petition the court for the debtors’ bankruptcy as before because this procedure remains unaffected by the changes. Equally, the procedure for petitions presented by personal representatives of insolvent estates or partners of insolvent partnerships remain unchanged.
So, why the change? At present, the courts are heavily overburdened and the Government are looking at ways to ease that burden. Encouraging alternative dispute resolution methods (such as mediation or arbitration) is one way. The second has been the reduction of bankruptcy petitions heard by the court. According to Insolvency Service statistics there were 11,423 debtor own petitions filed in 2015 (compared with 4,374 creditor petitions). Therefore, on the face of it, amending rules that remove debtor own petitions from being a court process will remove a significant volume of administrative court time.
PBC announces successful completion of two IVAs
PBC Business Recovery & Insolvency Ltd are pleased to announce the recent successful completion of two individual voluntary arrangements (IVA).
The first of these was the IVA of a solicitor who was confronted with multi-million pound debts as a result of a firm of solicitors (of whom he was a partner some 2 years before) entered into partnership administration. PBC’s solution was the best outcome for both the creditors and the debtor, who was able to retain his ability to practice as a solicitor.
The second IVA saw creditors receive payment in full plus statutory interest. The terms of the IVA enabled the debtor to pay affordable contributions over a five year period rather than attempt to meet the demands of various credit card companies. In addition, the IVA also enabled the debtor to retain his family home.
At PBC Business Recovery and Insolvency we can advise you whether an IVA is appropriate. If appropriate, we will firstly assist you with the preparation of the proposal and then act as nominee and convene the meeting of creditors. Should the proposal be approved, we will then act as supervisor.
We can also act on behalf of creditors who have received IVA proposals prepared by other insolvency practitioners. If necessary, we can advise on whether the proposal should be accepted or modifications proposed and if necessary arrange attendance at any meetings of creditors.
If you have personal debt issues, PBC Business Recovery & Insolvency offers a free one hour consultation to discuss your situation and the possible options available. Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.