2017 – A Year of Change

Where has this year gone? It seems to be that every year flies by; why is that?  Age?  Maybe.  But then you think about it.  We never have a break between seasons these days.  With Christmas rapidly approaching advertisers are pushing us to book 2018 holidays and I will not be surprised if shops are selling Easter Eggs by the time this has been read!

Regardless, we are here and what has 2017 been like? In the world of insolvency we were confronted with the biggest change in the way we conduct assignments since 1987, which despite the years seemingly going quickly these days, 1987 DOES feel a long time ago!  The Insolvency (England & Wales) Rules 2016 were an attempt to consolidate, bring the rules into the 21st Century and improve creditor engagement.  Well, two out of three ain’t bad, as the song says.

The PBC Mediation Service started this year and its accredited mediator, Gary Pettit, can boast 2017 was 100% successful in terms of settling each dispute over which he presided, including a £1 million professional negligence claim by a bankrupt against his own Trustee.

So, what lessons have I learned from 2017? Well, there are probably too many (I am always learning) but two key lessons are:

  • Always be prepared to adapt to changes, both in business and in life. Business can be great but it can also be extremely cruel. Whatever you do, do not bury your head and think those problems will go away. Either face them head on or;
  • Take professional and independent advice. It is not something new but when you consider I am currently working with three individuals who all thought they could deal with the UK court system. All three are now bankrupt and face substantial statutory costs (in one of those cases, adding 50% again on top of their original debt). I am looking at ways to extricate them from bankruptcy, which could have been avoided had they faced their demon rather than bury their head.

Away from the day-to-day business Kym Carvell and Jamie Cochrane tested their stamina by walking from London to Northampton in aid of the Ronald MacDonald charity. There is a separate article on how they did so I will not spoil the enjoyment of the readers.

So, on behalf of PBC, may I wish everyone a Merry Christmas and a happy 2018.

If you require any advice or assistance on any insolvency-related matter then please contact Gary Pettit or Gavin Bates at PBC Business Recovery & Insolvency on (01604) 212150.

What is insolvency and does it apply to me or my business?

Insolvency is a very simple situation that can need a very difficult and sometimes complex resolution. If you find yourself in a situation where you are potentially insolvent you will need to take a long, clear look at things and decide what is the best option. In this video, Kym Carvell looks at what insolvency means for a business or individual. With over 30 years of experience of insolvency, Kym is a respected member of our team who is able to explain financial situations with clarity, honesty and a sympathetic ear. If you think the situations described in this video may apply to you, or your accountant is flagging a potential issue, your best option is to contact us as soon as possible so we can begin working towards a resolution.

 

Leopards do need to change their spots

It is a common phrase but if a leopard does not change its spots then it remains a leopard. Probably the most recent example of that has been British Home Stores who did not keep up with shopping trends.

Now another big name has fell into difficulty with Toys R Us in the United States falling into Chapter 11. For those who are unaware, Chapter 11 of the US Bankruptcy Code is similar to administration in this Country.  It must be emphasised this latest news involves the American division and neither the UK, European, Australian or Asian operations are caught under the current issues.

The (chapter 11) process is being used to enable the company to restructure approximately $5billion of debt, aided by a reported $3billion of new financing. The issue I would be asking about is more of a practical one.  Recent statistics suggest buying habits for toys are changing with estimates indicating 2016 saw 13.7% of toys being acquired on-line, as compared to 6.5% the previous year.  You have to question whether the large warehouse-style outlet is becoming a dinosaur when compared to the laptop in the home.

Whenever we at PBC look at a corporate restructure we first look at trying to identify what are the reasons for the company experiencing difficulties. After all, a leopard that does not change its spots will only endure a reoccurrence of those issues at a later date.  Toys R US say all 1,600 stores and 64,000 employees in America will be preserved, yet retail has seen the on-line competition bite into their business by another 7%in 2016.  I may be guilty of being too simplistic but often at PBC we find it is the simple things that are over-looked and, in the end come back and bite you.

If you require any advice or assistance on any insolvency-related matter then please contact Gary Pettit or Gavin Bates at PBC Business Recovery & Insolvency on (01604) 212150.

When are creditors paid?

When a company or person is going through a financially difficult time common questions which occur are who will get paid and when? Many people often have a vested interest in a company and there is a very clear order in which they will appear in the order of payment. While this is sometimes frustrating it is a legal requirement and cannot be changed. In this video Gary Pettit, one of our directors and a licensed insolvency practitioner here at PBC, takes you through the basics of what will happen and who will be paid at what point in the process. He will also look briefly at the different ramifications of areas such partnerships and limited companies. As always the advice is to contact us if you feel we can help but this video should clear up some of the more regular questions we hear about payment before, during and after insolvency procedures.

Administration & Creditors’ Voluntary Liquidation

One common mistake that business owners, the press and many others make is to ask ‘is my business bankrupt’ or ‘can my business be bankrupt’. It is only possible for an individual to be bankrupt so a company will go through the process of liquidation or administration. In short, if you are looking at a company that is not in a position to pay the creditors and the situation is clearly not a short term issue then you may need to enter administration or liquidate.

This video clearly explains what the different processes are and Gavin Bates, one of our licenced insolvency practitioners with over 25 years experience, takes you through your options.

Paying by card – know your rights!

Research by the UK Cards Association showed that, in 2016, 77% of national retail sales were made by card. It was also announced in the last few days by the British Retail Consortium that debit card payments overtook cash for the first time, no doubt increased by the use of contactless payment.

Most payments by credit card (including some charge cards) are protected by law: consumers have a legal claim against the card issuer where the goods or services cost between £100 and £30,000 and are not delivered.

In addition, for debit and credit cards (including pre-paid cards), the card schemes provide a system of “chargeback”. Chargeback schemes are voluntary schemes with the terms and conditions set by the card issuer and accordingly the rules vary from issuer to issuer.  However most schemes allow the card issuer to ask the merchant acquirer to reverse a payment made by card with no minimum or maximum limits.

It is unfortunately inevitable that some payments made for services will not be honoured when a retailer enters into insolvency. New guidance issued to insolvency practitioners states the appointed insolvency practitioner must issue a notice on the retailer’s website informing customers of whether their services or goods will be delivered, as well as informing them of the above rights.

The UK Cards Association has also issued a guide to card holder’s rights, which can be found here:

http://www.theukcardsassociation.org.uk/wm_documents/Credit%20and%20debit%20cards%20-%20A%20consumer%20guide%20June%202016%20FINAL.pdf

Be pro-active or accept your fate?

Apart from the obvious frustration, what steps do you take upon receiving the news one of your customers has gone into an insolvency process?  You may have retention of title on stock, it may be a debt write off that is business-threatening to you.

 

For 30 years The Insolvency Act 1986 has been the basis for all insolvencies in England and Wales, subject to various amendments through statute or legal interpretations. However, 6 April 2017 saw the most fundamental change in legislation with The Insolvency (England & Wales) Rules 2016 (“The Rules”) coming into force.

 

Most of the Rules are a consolidation of provisions that were considered to be similar for each insolvency type within The Insolvency Rules 1986.  Other changes are an attempt to “modernise”, such as the ability to communicate through electronic means or, simply via a website.  Other changes are more fundamental on a practical level.

 

From hereon there will no longer be any physical creditor meetings, unless a requisite majority of creditors demand one. Instead we have electronic voting, virtual meetings, resolutions by correspondence and a process known as “Deemed consent”.  The deemed consent procedure could mean notices are sent to creditors on one day and 7 days later a liquidator is appointed with creditors getting only a few days’ warning.  So, what if you believe the conduct of directors has been questionable?  Physical meetings have been a forum for posing relevant questions so, if you believe there is good cause for challenging the directors you must provide a written request for a physical meeting in a very short space of time.  The burden to act quickly really does fall squarely upon your shoulders!  Further information can be found here.

 

The Rules also place the onus upon creditors to monitor for progress reports.  In the past an insolvency practitioner would send notice stating the progress report can be accessed on a specific website, providing you with the file name and password.  That has ceased and it is now up to the creditor to monitor when the reports will be available.  In theory, that is fine but a liquidator has two months after each anniversary to submit a progress report.  What is the creditor supposed to do?  Check every day until it is there?

 

For me, the Rules impose a burden on advisors, credit controllers and the financial institutions to be more aware, act instantly or roll over and let the process take its course. Personally, I am concerned the Government have gone too far and reforms to The Rules will occur but, until that time, creditors need to be proactive.

 

Should you require any further assistance on The Rules, or any other insolvency-related issue then please contact PBC Business Recovery & Insolvency to discuss and advise on your situation.  Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.

PBC set new ground-breaking law

On Monday 14 November 2016 at 10.12 a.m. Gavin Bates and Gary Pettit from PBC Business Recovery & Insolvency were appointed joint administrators of Bradford Bulls Northern Limited. They were asked to consent to the appointment just over an hour beforehand.

bradford

Bradford Bulls are former World club champions and Super League champions but over the past four years have crashed into a depth of financial difficulties. Faced with a winding up petition presented by HM Revenue & Customs it was administration or just 18 minutes after the administration appointment the club were due to be wound up.

The administration appointment was made by the holder of a floating charge that secured personal lending. Once appointed the administrators expressed some concern the loan agreement may be flawed in terms of the power to enforce its security and having raised this with their solicitors it was agreed to seek court directions to declare the appointment as valid.

For those not involved with insolvency, if the appointment of an administrator is deemed invalid the adminstrator can be held guilty of trespass. Also, the appointment of administrators is determined not only by the date but the TIME of appointment.

Based upon advice two applications were filed, namely:

  1. Seeking a declaration that the appointment by the floating charge holder is valid, or failing that;
  2. The court make an administration order with retrospective effect.

The applications came before Justice Mann in the High Court on Monday 21 November 2016. On considering the applications the judge noted HM Revenue & Customs supported the appointment of Gavin Bates and Gary Pettit and that administration would serve a better purpose for the stakeholders than the alternative of liquidation.  The judge also had to consider whether the court had the power to make the appointment retrospective.  In not doing so he automatically places the adminsitrators in a position where they were trespassers for the previous week.

After considering the insolvency provisions, the benefits of administration and the support from the largest un-connected (and petitioning) creditor Justice Mann decided the court did have the power to make retropsective orders. Rather than consider the legal arguments over the vailidity of the floating charge security he terminated the original appointment with effect from 14 November (ie the date of the original appointment) and made an administration order including the appointment of Gavin and Gary effectively from 10.13 a.m. on Monday 14 November.

PBC appointed joint administrators of The Castle (Wellingborough) Ltd

PBC logo

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.