The New Rules – 12 months on

The 6th April will mark the first anniversary of The Insolvency (England & Wales) Rules 2016, (commonly referred to as the “New Rules”). Doesn’t time fly?  So, we thought the anniversary was an opportunity to reflect and comment on the major changes introduced by the New Rules.

The right to opt out of receiving future correspondence – this has been used by about 5% of creditors, typically where there will be no return to creditors or where the creditor decides to write the debt off and does not want to keep being reminded of the bad debt every 12 months. This appears to be a well thought out change to the legislation and one which is well understood by creditors, particularly when you bear in mind that any notice of intended dividend must still be sent to these creditors, giving them the chance to opt back in when appropriate.

The right for an IP to post all documents online, having given notice to creditors they will do so – this rule change has not really been tested. The proof of how well creditors understand this change will come in the next few months as the second report since the New Rules is uploaded with no notice to creditors. The rule has been brought in to cut down on the copying and postage costs associated with each report to improve returns to creditors, but will that cost be replaced by phone calls with creditors asking for updates? Time will tell.

The abolition of physical meetings and the new decision procedures – this is probably the most fundamental change and is explained in detail in our blog here. Put simply, physical meetings can only be requisitioned by creditors (under a set criteria) and creditors’ views are now sought by virtual meetings, correspondence, electronic voting or deemed consent. We have had two instances where creditors have asked for physical meetings and, in both occasions, it was probably unnecessary (indeed in one the physical meeting was adjourned and nobody attended the adjourned meeting). Some good points of this rule change include the removal of final meetings (which nobody ever attended and were a waste of time and money) and the increased flexibility the New Rules now offer meaning two different cases, say a “Burial” liquidation of a company with minimal assets and a large complex company can be administered differently rather than applying a “one size fits all” approach which was excessive in many cases.

Standard Forms now longer exist – in their place have come a prescribed list of information in a set order (sounds like a form doesn’t it!) Despite the abolition of prescribed forms, Companies House have issued new forms for their purpose, which must be used when filing. The real purpose of this rule we suspect has not yet been met yet; at PBC we believe the purpose here is to allow online filing of the information at some point in the future.

The formation of creditors’ committee has changed – previously creditors had to vote for both the formation of a committee and its members at the same time. If the former happened but the minimum of three members were not forthcoming, then the committee was not formed. Now the New Rules mean that creditors can vote for the formation of a committee but not its members. If this happens, the IP then has to seek nominations for the minimum number of members and only then if there are insufficient members does the committee not form. At PBC we have seen this occur on several occasions, probably because of the creditors not understanding what a vote in favour of a committee means.

The New Rules have introduced many changes which are too numerous to list but these are, in our view, the major changes affecting creditors. It is also interesting to note The Association of Business Recovery Professionals, the industry’s trade body, took nearly ten months to update the standard terms it issues which form part of IVAs and are yet, at the time of writing, to update their Creditor Insolvency Guide website!

So in summary, are the New Rules good or bad? In theory our short experience is they are, in the main, a positive move forward.  However, it is a question that cannot be fully answered until they are tested in court over the next year or so.

Early advice aids survival of business

At PBC, we have written numerous blogs and articles about how taking early advice about a worsening financial situation can lead to more options being available and the earlier the advice is taken the more likely a recovery process can be instigated. This message was true in the recent administration of Noble Express Ltd.

The most common reasons why businesses fail

The company, which supplied catering equipment, cleaning chemicals and other non-food essentials to the hospitality industry, entered into administration on 16 January 2018. However, the board of directors first sought our advice in the autumn of 2017, at which point the sale of the company remained a genuine possibility.  Unfortunately, no sale could be secured but the traded during its busy period in the run up to Christmas.  The director then sought advice again at the beginning of January.

Following the company entering administration, the joint administrators (Gary Pettit and Gavin Bates of PBC) traded the business with a view to finding a buyer. Several expressions of interest were received and a sale of the business was secured in February.  The sale has seen the majority of the company’s employees retain their jobs as well as an increased return to creditors.

Gavin Bates said, “It is always pleasing to see directors take advice at an early stage when their company is faced with financial pressures and difficulties rather than burying their head in the sand only to emerge when it is far too late. In this instance, I was approached early enough to enable viable trading to occur whilst searching for a buyer.  The early approach ensured there was both cash available to fund trading and stock in the company’s premises which meant I could trade without seeking further supplies from creditors.  I am delighted with being able to secure a sale of the company’s business and assets, and look forward to distributing the funds I am holding to creditors”.

CHARITY QUIZ A GREAT SUCCESS

Greens Restaurant was filled with the sound of brains whirring as fourteen teams did battle at PBC’s charity quiz in aid of Ronald McDonald House at Alder Hey.  It was a night which saw the teams discover 12 is the only number which scores itself in Scrabble and 23 is the next number in the sequence 1, 40, 4 and 3.

The winners were Hewitsons (below), with a score of 128 out of a possible 150, with Tollers taking second place only 3 points behind in a good night for the lawyers.

PBC would like to thank everybody who attended and made the event such a success, with £1,799.88 being raised for charity as PBC have covered the costs for the evening.

The team’s tuck shop has also raised £71.29 so far this year, bringing 2018’s current total raised to £1,871.17. Further details about the abseil and other events will be released shortly.

And 23. Motorways with M25 junctions (anticlockwise around the M25).

An alternative credit check?

Are you an SME who is contracted to supply (or are considering supplying) a large company? If so, how confident are you payment of your invoices will be paid in a timely manner, if at all?

Why it’s important to check your credit file

In recent times we have witnessed some large companies failing, including Connaught Construction, BHS and recently, Carillion.  With each failure there is a wake of debt owed to thousands of suppliers that will end up being written off.  Some of that debt was unpaid because the supplier was caught up in the contractual web of having to continue to supply or face the potential of being held in breach of contract.  Others may be apportioned to a “Relaxed” credit control.  After all, the biggest customer on your books is too big to fail, isn’t it?  The examples given answer that question!

However, those in charge of considering a supply line to large companies have a tool available to enable them to determine whether the prospect of working with a large company is the “Golden opportunity” or something where you politely say, “No thanks.”

The Small Business Enterprise and Employment Act 2015 (“SBEEA”) introduced a payment policy reporting obligation on all large companies. A “Large company” is defined as one that meets at least two of the following:

  • Annual turnover of at least £36 million.
  • Balance sheet value of £18 million.
  • At least 250 employees.

 

The reporting duties imposed by the SBEEA came into effect from 6 April 2017 so we should start seeing these payment reports very shortly as financial year ends will need to provide for this obligation.

The information required in this report must incorporate a narrative description of the business standard payments terms and include:

  1. The standard contractual length of time for payment.
  2. How suppliers have been notified (or consulted) on any changes in this policy within the financial year.
  3. Description of their policy for resolving disputes relating to payments.
  4. Statistics covering:
  • the average number of days to make payments.
  • The percentage of payments made within 30 days, 60 days and 61 days or longer.
  • The percentage of payments due within the reporting period that were not paid within the agreed payment period.

 

They will also have to reveal whether:

  • Suppliers are offered e-invoicing.
  • Supply chain finance.
  • The policies regarding deducting sums from payments due as a form of charge to remain on the suppliers’ list.
  • Whether they have deducted sums from payments due.
  • Whether they are a member of a payments code and, if so, name the code.

 

This report must be published on a web-based service provided by Government and within 30 days of the end of the reporting period covered. While it is still in its infancy this service should prove invaluable when you are considering working with a large company and should be part of your credit/sales practice before you sign on that dotted line.

Time to pay thanks to Carillion?

Following the demise of Carillion, HM Revenue & Customs have announced their Business Payments Support Services are open to approach by any company or business that has suffered a short-term cash flow problem as a result of the large scale failure.

The Support Service will consider:

  • Instalment arrangements of tax due that cannot be paid on time;
  • Suspension of recovery action/proceedings;
  • Review penalties for missing statutory deadlines;
  • Reduce any payments on account;
  • Agree to defer payments due to short term cash flow difficulties.

 

Should you find yourself facing difficulties to meet your tax liability as a direct result of the Carillion failure then you may apply to the Support Service on 0300 200 3835 or go on the website at www.gov.uk and search “Dealing with HMRC-payment problems.”

The obvious question this raises is, “Why is this offer being made for Carillion creditors?” At PBC we believe this could set a precedent for others who are caught under an insolvency process.  After all, what is different between a supplier losing (say) £5,000 in the Carillion liquidation to that under “Standard” UK liquidation?

At PBC we are often approached to assist companies with addressing tax issues whether in respect of trying to secure a time to pay agreement or by other formal means where appropriate. Should you require advice in this respect then contact PBC and speak to one of our insolvency practitioners on (01604) 212150 or email info@pbcbusinessrecovery.co.uk.

PBC announce Charity Quiz

 

PBC are pleased to announce a charity quiz to raise money for Ronald McDonald Charity Houses.

The quiz will be held on Wednesday 21 March 2018 at 6pm at Greens Restaurant, Collingtree Park Golf Club.

For further details about the evening, please find the invite and booking form here.

For further details about why PBC support the charity, please click here .

Second Edition of The Leaf Released

PBC are pleased to announce the release of the second edition of The Leaf Magazine, which can be read here.

Topics in this edition include:

  • Beware the Unregulated Insolvency Advisor
  • Focus on Mediation
  • Statutory Interest on Corporation tax in Solvent Liquidations
  • And Many More

A Round Up of Recent Insolvency Statistics and Perhaps More Trouble Ahead!

Last week The Insolvency Service released the insolvency statistics for the fourth quarter of 2017. Whenever these are published, the newspapers will always look for the story without going into the details.

So for example, the press reported that personal insolvencies in 2017 increased by 9% as compared to 2016, Of course that is correct, but they didn’t report that personal insolvencies fell by 11% in Q4 2017 as compared to Q3.

It is of course true that when inflation is higher than increases in wages then it will have an effect on individuals’ surplus income and in many cases (99,196 in 2017), will lead to personal insolvencies. In the short term this is expected to continue.

Another story that didn’t seem to hit the headlines was a 2.5% rise in corporate insolvencies in 2017 as compared to 2016. First this is a small increase in any event. However, it should also be noted that corporate insolvencies have been at a historically low number for a few years now, so a small increase on what is already a small number is not worth mentioning.

So this all seems like reasonably good news for the economy as a whole. On face value it does but at PBC we are starting to see growing signs of trouble ahead.  Over the last 3 months we have seen a growing number of enquiries and work.  It is fair to say that the retail sector (the high street in particular), is struggling, partially because of the reduction in personal incomes., and also businesses which deal with discretionary spend items (for example, new car sales are down).

At some stage we also expect fallout from the Carillion failure as subcontractors and those further down the chain come to terms with the lost income and future work.

It was also interesting to see that the FCA has started to address the issue of interest only mortgages. The FCA estimate there are 1.67 million full interest only and part capital repayment mortgages in the UK and the most of these will conclude in the next 10 to 14 years. Clearly as these come to a conclusion it will have an effect on those consumers and therefore the economy.  Only time will tell.

As always if you or your business is starting to struggle we would always recommend that you take advice at an early stage. Initial meetings with PBC are free and confidential.

PBC ANNOUNCE DIVIDEND TO CREDITORS IN LIQUIDATION

PBC are pleased to declare a dividend of 26.82 pence in the pound to the unsecured creditors of Silver Sovereign Limited.

The company’s major asset was an adverse directors’ loan of approximately £57,000. This has been recovered in full which has allowed a payment to creditors to be made.

Joint liquidator, Gavin Bates, said, “Whilst it has taken some time to collect the payments from the directors in respect of their loan, the approach taken has resulted in a significant return to creditors. It is always good to make payments to creditors”.