Pragmatic approach avoids bankruptcy.

When dealing with formal corporate insolvency appointments, sometimes directors owe funds to the company which, as office holders, we are duty bound to try and recover for the benefit of the company’s creditors.

One recent case being dealt with by our Milton Keynes Office had this very issue, but the director had also provided personal guarantees to company trade creditors totalling circa £300K. One of these trade creditors had also commenced bankruptcy proceedings against the director.  We were appointed liquidator of the company and, following some investigation, explored the prospect of whether an informal ‘full and final settlement’ could be reached in order to avoid bankruptcy and maximise the return to the liquidation and guaranteed creditors. We discussed this with the director and suggested they contact a solicitor who was then able to put the offer to all creditors.

We are pleased to report that all creditors accepted the offer, the settlement funds were received within 7 days and, in avoiding bankruptcy proceedings the director can now move forward.

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

Director duties reinforced (again!)

It would be wrong to imply HMRC simply agree to TTP upon application. PBC Business recovery and insolvency practitioner

What can appear to be straightforward is sometimes never the case as demonstrated by the numerous questions we get from Directors in respect of their statutory duties. This was recently highlighted on a seminar hosted by Gary Pettit where many questions were raised following a short presentation.

All too often directors can find themselves getting embroiled in the emotion of the situation, particularly where there is a dispute within the board of directors with the issues prevailing over their duties.

The court adopt the view you are a director first and foremost, while personal opinions or conflicts of interest are immaterial.  This has recently been demonstrated in the High Court decision of Jacob Beake and Paul David Allen (Acting As the Joint Administrators of London South West SW Limited) and – (1) Jamie Richard Chapman and (2) Bodman House Management Ltd [2023] EWHC 1986 (Ch).

In this case, the director refused to sign a lease to a property, jeopardising the sale.  It is understood the director tried to use his refusal to sign as leverage against a personal dispute with the administrators of a connected company.  The court took the view this refusal was a breach of duty and was interfering with the duties of an administrator.  As a result, the director was ordered to sign the lease and costs were awarded against the director.

This decision should act, as yet another warning to directors who choose to put their personal issues before their statutory duties, particularly if it results in the interference of the duties carried out by an office holder.  It also serves as a warning for those directors who are embroiled in a management dispute whereby, if you fail in meeting your statutory duties then you must be prepared to face the consequences.

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss 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.

Is the risk of insolvency increasing?

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This morning (31 October) the BBC reported, “The number of firms in “Critical financial distress” jumped by 25% in the last three months.”  Indeed, the number of companies falling under this description was almost 38,000 and is based upon a report that county court judgments (“CCJ”) exceeding £5,000 have increased significantly.

Firstly, some perspective.  There are over 5 million businesses registered in the United Kingdom.  However, that is small consolation if you are one of the 38,000 (or close to becoming one of that number).

A CCJ can be damaging to a business as it effects credit ratings, can impact on the ability to obtain supplies and, sometimes, can be a precursor to corporate failure.  However, you may get a CCJ for several reasons, including:

  • You have lost a legal claim, so judgment was made against you; or
  • There had been an innocent oversight; or
  • You have cash flow issues where you are unable to pay debts as they fall due.

Losing a legal claim can have obvious and direct consequences that may even result in the demise of your business.  However, cash flow issues can be something that creeps up on a business – sales may take a slight dip, that invoice you were expecting to be paid is delayed, or simply not paid at all.  A common issue we are seeing frequently is costs of materials have increased, resulting in a reduced profit margin on a job you are contractually bound to complete.  In business, you can be so focussed in doing the business that you take an eye off the business itself and these operational issues do not get recognised as early as they might.

Just because a company is struggling, it does not automatically mean failure.  As PBC have demonstrated time and again, taking early advice has enabled us to consider the options available and it enhances the prospect of turning your fortunes around.  It should be said that it is rarely too late to take advice.  However, the longer you leave it until you do, generally narrows the options available.

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.

Administration saves 170 jobs – It’s what we do.

Following our recent reports about our work in safeguarding businesses, PBC have now successfully ensured the continuation of another business via Administration, where all 170 employees were protected. Had the company entered into liquidation, it would have resulted in all employees being made redundant where the burden on the Government Purse was estimated to have been in excess of £200,000 in respect of the employees’ entitlements.

Ian Cooke from PBC said,

“This is another example of directors seeking early advice and where the PBC Team were able to assess the situation quickly and advise on the most beneficial solution for all stakeholders.”

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

Don’t let RAAC crumble your business

It is fair to say the media have enjoyed themselves recently with RAAC; a phrase that may find itself in the dictionary in due course.

However, we do find ourselves in some agreement with the media in that a potential problem does exist, especially as the Government brings in the Building Regulations (higher risk building procedures) (England) 2023 and the Building Regulations etc (amendment) (England) Regulations 2023, effective from 17 August 2023.

The new regulations refer to a building being of high risk if it is a block of flats, a hospital or care home more than 18 metres or more than seven stories high. The issue could be where you own the freehold of such a building where tenants are in situ. Who covers the remedial costs? Can these be passed on?

Another risk can be the closure of the building while an inspection takes place and, where necessary, appropriate remedial action is taken.  This could mean your business having to relocate or, as a landlord, there may be responsibilities for you to secure alternative accommodation for your tenants. Again, there may well be costs involved.

All the above, creates a potential drain on funds and may, in some circumstances, mean a default against secured lending.  In this situation a secured lender may have the power to appoint receivers under the Law of Property Act.  Some lenders appoint a licensed insolvency practitioner as LPA Receiver to oversee and ensure the obligations under the regulations are met and this approach could become an increasing practice among lenders.

To try and prevent secured creditor action, PBC would suggest those facing financial issues, because of owning a high-risk building, should first check to see if they are covered for business interruption insurance.  Alternatively, speak to your lender(s) to explore ways of managing the situation.  If all fails, then consider taking advice to protect you and your business.

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.

A step closer to compulsory mediation?

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What goes through your mind when having to consider (or to defend) litigation that will involve court intervention? Frustration, demands on your time, delays in the process, or merely the uncertainty of a positive decision at court. Arguably, the core consideration must be costs, both your own and the exposure to an award against you to pay your opponents’ costs.

For those who recover their costs, litigation will feel like you have accomplished something. However, if there is a partial (or no recovery) then you can often feel hard done by.

From 1 October 2023, fixed recoverable costs will be extended across the ‘fast track’ and in a new ‘intermediate track’ for simpler cases valued up to £100,000 in damages. This means there will be a limitation on the level of costs you may recover. Whilst there are some exceptions to this, in general, cost recoverability becomes an important subject when considering the prospect of litigation.

At PBC, we believe this is another move by the Ministry of Justice towards encouraging alternative dispute resolution (“ADR”) or even the suggestion of compulsory mediation.

Mediation is a recognised form of ADR and is usually at a fixed cost, payable in equal share by the litigating parties. It is far quicker than the court process and provides the parties with an opportunity to settle their differences via the mutually agreed appointed mediator.

CEDR accredited mediator Gary Pettit of PBC said,

“All too often I discover the litigating parties are not that far apart in their thinking and sometimes they want the same thing but have simply not listened to one another.

Mediation is an opportunity to resolve a dispute more quickly and at less risk. Occasionally, no settlement can be reached, but I have known others to settle shortly afterwards, following both sides having had the opportunity to think a little more about the argument(s) and the commerciality of an early resolution.”

If you require any advice or assistance on a corporate or insolvency-related mediation, or any other 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.

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. 

Claims by directors to the Redundancy Payments Service as employees..

In July we posted about employees’ rights to redundancy in an insolvency process and clarified the four main claims employees can make.

This post is aimed at directors who look to make a claim as an employee when an insolvency event occurs. This link Check if you can apply for redundancy payments as a company director – GOV.UK (www.gov.uk) provides greater detail on the following:

  • Eligibility
  • How to apply
  • What to do if the claim is rejected

What is not covered off though is, if money is owed by directors to the company when it enters into an insolvency event, the Redundancy Payments Service will not make any payments to directors even if claims pass all the eligibility criteria. Therefore, it appears to be prudent to give some consideration in repaying these sums beforehand if possible, for the following reasons:

  • It may enhance the probability of a successful claim
  • Any appointed liquidator/administrator has a duty to recover the loan account in any event given it will be an asset.

If you have any queries regarding the above, please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit https://lnkd.in/ehKHz4K for further information.

Sale of business as a going concern and securing employment!

We are pleased to share that our Milton Keynes Office has recently completed the sale of the business and assets of a company that had been trading for over 29 years, securing the business and safeguarding the jobs of all 15 employees.

The sale was not to a connected/associated party and the key to this successful outcome was the director sought our advice at an early stage, which provided time to look at the best-case scenario in a difficult situation. We are also pleased to report that given our careful planning of the process the company’s secured creditor was fully redeemed within just two weeks of our appointment, removing the personal guarantee provided by the director.

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.

Highest liquidations since 1960

That is the headline from the corporate insolvency statistics for the second quarter (1 April – 30 June 2023) that were published on 28 July by the Insolvency Service. 

In total there were 6,342 company insolvencies of which 93% were either creditors voluntary liquidations (5,240) or compulsory liquidations (637).  Collectively in the year (Q3 of 2022 to Q2 of 2023) the recorded number of creditor voluntary liquidations (“CVL”) is the highest since 1960, which is remarkable when you consider arguably our worst recession that peaked in 1993.  The latest figures mean the rate of liquidations is 52 in every 10,000 active companies registered as compared to 43.9/10,000 one year ago.

The remaining numbers reported were 409 administrations and only 56 company voluntary arrangements.  In addition to these numbers the two new rescue procedures introduced under the Corporate Insolvency & Governance Act have hardly been utilised.  From 26 June 2020 to 30 June 2023 there have only been 45 Moratoriums and 21 Restructuring Plans.

The big question must surely be why?  In short, the common features appear to be:

  1. The combination of Brexit, quickly followed by Covid-19 has had a severe impact on the world-wide economy.
  2. Cash flow has been adversely hit following the withdrawal of the Government’s fiscal and other measures put in place to support businesses during the pandemic, together with the legacy the financial support and the pandemic have left.
  3. Because of that support, companies that would ordinarily have ceased trading in 2020-21 were able to continue longer than envisaged.  This means the 2022-23 figures are swelled by the legacy of the higher than usual company survival rates during the pandemic.

Something that you will not see in Government dispatches is that many companies are using CVL as a vehicle for selling the business and assets, or even to “Phoenix” into a new company.  This is because of the much-contested decision to make HMRC a secondary preferential creditor, resulting in the restructuring procedures being no longer viable in many cases.  The low numbers of administrations, CVA, moratoriums and restructuring plans are indicative of this problem.

The saying, “Lies, damn lies and statistics” has some merit when considering the insolvency numbers because it is the devil in the detail beneath those core figures that matters and the signs are many businesses are finding themselves the subject of a merger or acquisition.

At PBC we are finding ourselves assisting companies and their professional advisors with going concern sales more often than in the past and we see no reason for that current trend to change in the short term.  However, more often than not, the key to an organised resolution is to seek advice at an early stage.  It is a long-standing piece adage but there can be no coincidence that most businesses are saved in one form or another where the directors sought advice early.

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