Listening to the news all we seem to be hearing is inflation has reached levels not seen in 40 years, petrol prices surging to record levels following the Russian invasion of Ukraine and the demands of employees, including industrial action, for wage increases are putting pressure on businesses and, in particular, their cash flow.  Add to this the cost of raw materials and goods that place a further squeeze of profit margins and you can only conclude it is tough out there in the business world.

The Insolvency Service latest statistics, released last week seem to reflect the tough time businesses are facing at the moment with 1,827 company insolvencies in July 2022, a rise of 67% compared with the same month in Covid affected 2021 but also 27% higher than July 2019.  The majority of this figure is creditors’ voluntary liquidations (CVL), which increased to 1,609, some 60% higher than both 2021 and 2019.  Indeed, the level of CVLs for the second quarter of 2022 was the highest on record.

The number of compulsory liquidations fell by approximately half from the number in July 2019.  Given the majority of compulsory liquidations pre-pandemic were based on petitions from HM Revenue & Customs, this is a sign that HMRC remain more prepared to compromise than in future.  How long this approach will remain is uncertain so acting now is imperative.

While these figures appear daunting, some of the liquidations were companies where the core business was sound; it was purely a cash flow issue, combined with an unmanageable tax liability that prevented a turnaround situation.  This is due to the change in law whereby HMRC now hold secondary preferential status for a large proportion of their unpaid debt.

Should you or a client require any advice or assistance on a company suffering as a result of the cost-of living or 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.

The Institute of Directors(“IOD”) has recently announced its plans to introduce a code of conduct for directors to rebuild public trust in businesses.  The plans follow in the wake of recent headline-making scandals at Carillion, BHS and P&O Ferries.

The proposed code would be voluntary which would automatically weaken its effectiveness, particularly when bearing in mind a survey of IOD members showed only 21% would support a voluntary code compared to 58% backing a mandatory code.  However, the IOD states it believes a mandatory code would produce “a counterproductive focus on compliance” rather than allowing directors to focus on running the company.

The draft code released by the IOD focusses on nine key principles ranging from the directors personal conduct, a pledge for businesses reducing their carbon footprint as well as directors understanding their duties as directors.  We have long believed that before any individual is appointed as a director they should pass a basic “director theory test” (akin to the driving test) so that directors know their basic duties and are aware of facts including:

• The difference between their property and that of the company.
• Exercising independent judgement and acting with reasonable care and skill – abdicating responsibility to other directors is not acceptable.
• Avoiding conflicts of interest.

Perhaps the most important is to recognise when the company is insolvent and how their duties change.  Indeed, one of the points from the draft IOD code is “Maintain the financial viability of my organisation and, if that is no longer possible, take appropriate action to protect the interests of creditors”.  When directors become aware their company is insolvent and cannot pay the debts when they fall due, they should seek advice as soon as possible to protect their position.  In endorsing the IOD code, it cannot be a coincidence that many of the directors who find themselves under the threat of personal liability are, invariably, those who unwittingly breach their duties due to a lack of knowledge.

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.

PBC are delighted to announce the sale of the business and assets of a long-standing construction company that was suffering as a result of contract delays.  The company was initially placed into creditors’ voluntary liquidation in late April and was sold to an independent third party on 16 June 2022 in a move that enabled a number of former employees to be re-hired.  The sale will also ensure that a significant return will be made to each class of creditors in due course.

Liquidator, Gary Pettit said, “It is always pleasing to be able to save a business and ensure the continuity for employees, customers and suppliers.  This is an example of what can be achieved when directors seek advice at the appropriate time and I would like to thank all those involved in securing the sale.”

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 info@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

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