Those of you old enough to remember will recall the days of queuing to get into the local cinema to watch the likes of the latest Bond movie, the original Star Wars perhaps, or even Grease.  There were no reserved seats and it was a case of first come, first served.

 

The cinema industry has moved on from those halcyon days, but the key ingredient has remained the same; a good film to attract the audience.

 

And here lies a problem.  Due to the pandemic, many of those blockbuster films were suspended and even to this day are yet to be released.  The first ingredient to the business model is suddenly missing.

 

The world’s second largest cinema chain is Cineworld who operate 751 sites across 10 countries (102 of which are in the UK).  Cineworld recently announced they were consulting with solicitors after reporting suffering a £429 million loss in the last financial year.  It was also reported the group had liabilities of a staggering £4 billion.

 

In those “Good old days” there were no videos, DVDs or live streaming, so if you wanted to see the latest blockbuster movie you had to visit the cinema, or wait 2-3 years for its release on television, normally around Christmas.

 

In modern society, these films become readily available shortly after their release.  Indeed, this has been an issue with many scheduled film releases being delayed.  A statement from Cineworld about their current plight said,

 

“Despite a gradual recovery of demand since reopening in April 2021, recent admission levels have been below expectations.”  This is as a result of few films being available to attract the audience.

 

It is now being muted that Cineworld may enter into Chapter 11 (in the USA) and some form of restructuring vehicle in the UK.

 

At Cineworld, film releases are its raw materials, whereas admissions equate to their income.  At PBC we are seeing many businesses that are suffering a similar fate, only film release is replaced by materials, for example and admissions are similarly replaced with customers who, for one reason or another, are suspending or even cancelling orders.  Both of these issues have an adverse impact on cashflow and, in some cases, jeopardise the viability of the company itself.  “Cash is king” we are all led to believe, yet if a business cannot secure the supplies or is prevented from continuing with a contract then it is at serious risk of failure.

 

If you require any advice or assistance on mediation 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.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

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.