Don’t Let Late Payments Lead To Insolvency

How much does your business rely upon cashflow?

Does that seem like an odd question to ask?  Well, if so, why is it that a recently published report showed 60% of UK businesses expect late payment of invoices will increase?  Indeed, that same report claims we spend over 71 days per annum (equating to over £27 billion in lost revenue) chasing late payments.

We have all heard the phrase, “Cash is king,” but the vicious circle of late payment across businesses damages the economy and puts businesses at risk of needing to enter into an insolvency event.

Cashflow difficulties are invariably cited as one of the most frequent causes for business failure and at PBC we have seen examples where better credit control may have resulted in them avoiding insolvency altogether.  Indeed, in a recent liquidation a creditor was bemoaning had they been more strenuous with their efforts to get paid they may not have been staring at a write off now!

At PBC we suggest all companies need to take steps to accelerate payment of sales invoices as a sales ledger does not pay the bills, payment does.  That is not always easy to accomplish and a commercial view must be adopted at times.  However, if it has proven too late and you get that dreaded notice your customer is entering into an insolvency event then contact PBC and we can advise you of your rights and even represent you to ensure your interests are protected as best as possible.

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  Alternatively, visit for further information.

Formal crackdown on directors who dissolve companies to evade debts

The Insolvency Service has been granted new powers to take to task directors who dissolve companies to avoid paying company debts. This is as a direct result of directors dissolving companies to avoid repaying Government backed loans put in place to support businesses during the Coronavirus pandemic.

The new legislation now extends the Insolvency Service’s powers to investigate and disqualify company directors who have been deemed to have abused company dissolution processes.

Previously the Insolvency Service had these powers to investigate directors of companies that entered formal insolvency such as liquidation and administration. It is also understood that the Insolvency Service may also be instructed to investigate live companies where evidence has been brought to their attention of wrongdoing.

In addition, the new legislation also allows for the Insolvency Service to apply to court for an order to require a former director of a dissolved company, who has been disqualified, to pay compensation to creditors who have lost out due to their fraudulent behaviour.

Should you be a director and are concerned re the new legislation then please do make contact with Gary Pettit, Ian Cooke or Jamie Cochrane (01604 212150) to understand your obligations and responsibilities

End of Temporary Insolvency Measures

Creditor Enforcement to Re-commence

Since June last year, the Corporate Insolvency and Governance Act 2020 included temporary measures that prevented creditors from serving statutory demands or presenting winding up petitions, other than exceptional circumstances.

These measures have previously been extended with the latest extension up to 30 September 2021.  However, it has been announced today (8 September) no further extensions shall be sanctioned.  In short, creditors will be able to use statutory demands and winding up petitions to enforce debt positions with effect from 1 October.

In an effort to cushion the threatened explosion of winding up petitions, the removal of these temporary provisions has been tempered slightly by adding some interim provisions that will be in force until 31 March 2022:

  1. To protect businesses from creditors insisting on repayment of relatively small debts the current minimum debt threshold for a winding up petition has been increased from £750 to £10,000


  1. Creditors shall be required to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding up action.

However, existing restrictions will remain in place for commercial landlords whereby presenting winding up petitions against limited companies to repay commercial rent arrears built up during the pandemic is prohibited.  This is consistent with the continued moratorium over commercial landlords where tenants will remain protected from eviction until 31 March 2022, whilst the government implements a rent arbitration scheme to deal with commercial rent debts accrued during the pandemic.

In response to this announcement, Gary Pettit of PBC said,

“It was inevitable the CIGA moratorium on creditor enforcement would end, particularly as the interim provisions were becoming a “Debtors’ charter” and damaging the economy overall.  The hike in minimum petition debt is welcome and should be made a more permanent monetary limitation but time will tell.  With the likes of HMRC being unleashed on about 18 months’ worth of tax debts life could get challenging for businesses where debt has accrued.  The potential of an explosion of debt enforcement activity means businesses need to think about their position and take early advice as the earlier that advice is taken, the more options that are generally available.”

Should you have an insolvency-related issue then please contact Gary Pettit at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at

A Government scorned?

How many of you have taken out a bounce back loan, a CBIL, claimed furlough or even claimed under the Eat out to Help out scheme?  I guess many readers will be nodding their head at this point because most businesses have claimed some of this Government support during the pandemic lockdown.

For many businesses these schemes will act as the saviour and the loans will be repaid in accordance with the terms.  However, there has also been plenty of media surrounding those who have misused or misapplied funds originating from these schemes.  At the end of the day, it is taxpayers’ money (and will have to be repaid in due course) so those more unscrupulous applicants need be aware of the potential consequences.

While bounce back loans and CBILs under £250,000 are not personally guaranteed, directors need to understand that does not mean you escape personal liability.  For example, if a director draws down some of the loan to pay personal liabilities, that in turn creates a directors’ loan account, being a debt repayable to the company.  It can get worse as HMRC could determine that the personal use was income and accordingly, gives rise to PAYE where the director can be held personally liable.

It has been reported that as of 30 June 2021 HMRC had conducted more than 12,000 investigations into coronavirus fraud.  Indeed, there have been several arrests with the number of prosecutions inevitably going to rise over time.  Further, a director in Bolton was disqualified from acting as a director for 11 years after he claimed a bounce back loan when not eligible and subsequently used the funds for personal gain.

In the disqualification case (above) the director, clearly, thought ensuring there were insufficient accounting records would aid his defence as there was no evidence of accountability.  Apart from a failure to maintain accounting records can be a criminal offence, banking records will always offer some form of transaction tracing.

So, what should I do?

I am bound to say, take early advice.

If you have used the corporate schemes for personal benefit, then look at how you are going to repay the amount taken.  When liquidators pursue a director for malpractice, they are looking for restoration and this can become a drawn-out and costly affair for the director.

A common practice appears to be to extinguish personal loans by way of dividends.  However, if the company has insufficient reserves, then drawing dividends is unlawful.  Even if there are sufficient reserves, a loan-extinguishing dividend is exposed to challenge as a breach of duty.

In terms of any breach in the job retention scheme, while it seems concerning, you should confess to HMRC and seek ways of restoring the position.  It is better to approach HMRC and include a proposal for making good than to be found out!

The Government have made it clear HMRC are to adopt a commercial understanding when it comes to recovery of tax liabilities and coming forward early should facilitate a structured restoration agreement.  Stick your head in the sand then be prepared as hell hath no fury like [the Government] scorned!

Should you have an insolvency-related issue then please contact Gary Pettit at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at


Government extends business support measures.

The Government have announced two further extensions of provisions under the Corporate Insolvency & Governance Act 2020.


Commercial landlords

The ability to evict or take goods in lieu of rental arrears has been further suspended until 25 March 2022.  The Government have produced a guide for landlords, which includes financial assistance.  The link is:

While this provision can be financially damaging to landlords, tenants also need to understand they must continue to pay rent (whether that is the contractual sum or a reduced amount under an agreement with their landlord) otherwise they are simply accruing a debt that could become unmanageable, while simultaneously increasing the landlord’s frustration, meaning they show less understanding once these provisions are lifted.

Further to the above, a director may have given a personal guarantee or, in non-payment of the rentals, could be exposing themselves to potential malpractice action (which carries personal liability) should their company ultimately fall into liquidation.

Debt enforcement

The restrictions on statutory demands and winding up petitions are being extended for a further three months until 30 September 2021.  The Government claim this is, “To protect companies from creditor enforcement action where their debts relate to the pandemic.”

It is, perhaps, interesting the announcement appears to be silent on extending the moratorium over wrongful trading, although directors, in particular, should not hold the misconception suspending wrongful trading provisions protects them if they continue trading beyond a point where creditors suffer.

While being of the view extending the above provisions further is kicking the can down the road, it is understandable.  The COVID road map has been pushed back until 19 July and with furlough to end in the autumn companies will need to re-adjust their overhead expenditure while also getting their business back on track after the adverse impact of lockdown.  Holding off aggressive creditor action to the end of September provides some breathing space for companies to recover before having to deal with aged debt.  Holding off landlords even further allows additional time for business owners to assess the viability of continued trading.

Should you have an insolvency-related issue then please contact me at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at


Have you heard the phrase, “You cannot change the past, but you may influence the future?  All too often we blame what has happened rather just accept that it has happened, and we need to address matters going forward.


The past 14 months, or so have been arguably the most challenging any of us have experienced but June brings forward two very important dates:

  • Assuming the Government road map stays on course, the 21st is expected to see the end of restrictions and a return to normal life.
  • It is widely believed the (thrice) extended deadline on various interim restrictions and amendments invoked under the Corporate Insolvency & Governance Act (“CIGA”) will end on 30 June.  These include a limitation on serving statutory demands, presenting winding up petitions and landlords taking recovery action for rental arrears.


In addition to the CIGA provisions, many businesses will now be receiving notification that repayments of the “Bounce Back” loans are falling due, while the employment furlough scheme is set to end in the autumn.

All the above events will serve to impact on company cash flow, while many will face recovery action from those debtors, frustrated they could not take enforcement action during the CIGA restriction period.  This includes HM Revenue & Customs where enforcement action has been limited to tax evasion and other limited taxation matters.  It is little wonder the Government have extended the restriction period.

Many will be aware of the phrase, “If you fail to plan then plan to fail.”  Unfortunately, all too often, people are great at what they do as a profession, but the accounting/bookkeeping side is seen as a necessary evil.  That may well be the view but if you had a flat tyre, would you carry on driving or stop and do that necessary evil of changing the wheel?

The prediction is UK will endure a short, but sharp economic recession.  As with previous economic challenges, those prepared are generally the ones who survive, so how do you promote the chances of you being one of those survivors?  Here are a few points that I see when assisting companies in financial difficulties:


  1. Put together a cash flow forecast (ask your accountant to help if preferred).  When you have this, check actual trading results with the forecast, at least on a monthly basis in order to compare projections with the actual results.


  1. Credit control.  Remembering cash is king and a good customer is a paying customer, and your customers are likely to be facing similar post COVID issues as you.  Unpaid debts do not pay the wages!


  1. With credit control comes setting and keeping to credit limits.  If you set a credit limit of (say) £5,000 for a customer and an order comes in that exceeds that limit, be bold enough to inform them you cannot entertain that latest order until some of the older invoices are paid.  Yes, some may grumble but your recovery time will improve.


  1. Where appropriate, consider negotiating longer debt repayment terms with creditors.  The Government anticipate there should be a lot of forbearance demonstrated by creditors (including HM Revenue & Customs) as, generally speaking and within reason, they would rather recover their debt than find they are on a list of creditors of an insolvency.


  1. Avoid the temptation of “Corrective trading.”  What I mean is, for example, do not think hiking your prices will help you recover sales income lost during the COVID restrictions.  While reasonable increases maybe acceptable, pushing that barrier too high will inevitably lose you custom.


  1. If in any doubt, seek independent and professional advice, whether that is from your accountant, solicitor, or an insolvency practitioner.  These advisors are there to assist you and steer you in the right direction so use them and use them at an early stage.


Should you have an insolvency-related issue then please contact me at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at

Are we heading for an economic cliff?

How prepared are you for when the COVID-related financial support and other interim measures fall away? 

With the impact of COVID the Government laid down, what was to become the Corporate Insolvency & Governance Act 2020 (“CIGA”) which became law in June 2020 and had retrospective effect to March 2020.  CIGA was seen as a balancing act between the detrimental impact the severe restrictions would have for trading on one hand against shielding business from depleted cash flow on the other.

In January the House of Lords debated over the continued restrictions on creditor enforcement imposed by CIGA.  These restrictions were intended to expire on 30 September but were extended to 31 December and subsequently 31 March 2021.  In general, the restrictions prevented the service of statutory demands/winding up petitions, landlord enforcement and suspended wrongful trading provisions.  As a result of these restrictions, the latest data suggests an unprecedented level of debt has accrued, including over £4.5 billion in rent arrears.

Furthermore, there is an estimated £70 billion of Government-backed lending, together with deferred tax liabilities, which is most likely going to make HM Revenue & Customs (“HMRC”) a major creditor in most insolvencies, resulting in them having significant influence on the destiny of businesses.  This influence is made all the greater following the upgrading of HMRC to secondary preferential status when formal insolvency is required.

So, what is the good news?

Well, the Government have announced an easing of bounce back loan repayments in an effort to ease cash flow demands.  In addition, recognising the resulting position of HMRC and the detrimental effect COVID has caused generally, the House of Lords have stressed HMRC need to be co-operative and engaging with a supportive approach on proposed COVID-affected corporate restructuring.  Clearly, time will tell on this recommendation and I would say this commercial understanding needs to be wider by including landlords and credit controllers who are all seeking recoveries.

I asked in the title whether we are heading towards an economic cliff.  Personally, I would suggest “Normal” (whatever that is) will not occur over night.  So, rather than a cliff as COVID restrictions ease off, maybe the economy will experience a gradual slope.

Whatever the outcome businesses need to be pro-active.  Review your cash flow and look at ways of reducing overheads, particularly while your turnover gradually starts to return to pre-COVID levels.  You should engage with your creditors and for those who are owed money, a commercial understanding is going to be the order of the day.  If all fails, the advice has to be to seek early advice.  It is no coincidence those who do seek early advice find they have more options available then those who leave it until the last minute.  As a Scout will say, “Be prepared.”

Should you have an insolvency-related issue then please contact me at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at

Can you claim business interruption?

Have you suffered financial loss due to the COVID-19 pandemic and the resulting restrictions imposed by Government?

On Friday 15 January 2020 the Supreme Court released their judgment in the case of Financial Conduct Authority -v- Arch Insurance UK) Limited and others where they upheld the lower court decision that COVID-19 was a notifiable disease for business interruption purposes.

Businesses need to check their insurance policies to see if their cover is up to date and includes business interruption. Once satisfied on these points they may begin to consider what (if any) losses the business has suffered as a direct result of COVID-19. Unfortunately, this may have come too late for some businesses who may need insolvency intervention, although the court have made it clear insolvency is not grounds in itself for rejecting a claim as you need to consider the business trend following the effects of the pandemic.

The judgment, itself, goes on for 112 pages so this editorial is merely going to provide a broad overview.

The insurers’ arguments

The principal arguments appear to be:
• COVID-19 was excluded because any loss caused by an occurrence of a notifiable disease is excluded for cover where the disease amounts to an epidemic (“The disease clause”).
• Prevention of access to trading premises was not imposed by law (“The prevention of access clause”).
• Insurers’ are not liable to indemnify policyholders for losses which would have arisen regardless of COVID-19 (“The trend clause”).
• The Orient-Express Hotels decision.

The court interpretation

The disease clause.
The court noted policies will list notifiable diseases but may provide for adding to that list where a new disease emerges that is a threat to public health. The court saw no merit in the insurers’ argument as that would make overall policy wording inconsistent.

The prevention of access.
While the court acknowledged it is for the policyholder to prove their loss as a result of COVID-19, prevention of access to trade premises as a result of local authority intervention was sufficient to trigger claims and did not require a law ordering closure. It was also accepted prevention of using trade premises needed to be in compliance with Government instructions and social distancing rules and not purely on grounds of being a hinderance.

The trend clause.
This was designed to assist in quantifying losses. In dismissing the insurers’ argument, the court said the standard turnover and gross profit derived from previous trading is adjusted only to reflect circumstances which are inextricably linked with the insured peril. It was accepted some of the adjustment when comparing past trading trends should include circumstances unrelated to COVID-19 such as a change in management.

Orient-Express Hotels Ltd -v- Assicurazioni Generale SPA

The insurers appear to place reliance on this case, being the only known reported case on business interruption claims. In short, the hotel was insured in the UK but was based and operated in New Orleans. It was severely damaged by hurricanes Katrina and Rita and claims were made for losses suffered as a result of the damage and damage to the surrounding area (of the city) resulting in a decline of income from reduced visitor numbers. At both the arbitration and arbitration appeal the decision went in favour of the insurers whereby losses resulting from the damage to the hotel applied. The losses caused by the surrounding city damage fell outside of the policy.

The Supreme court disagreed and made it clear, had the matter gone to court it would have over-turned the decision of the arbitrators. In reaching this conclusion the court said business interruption arose because both (a) the hotel was damaged and also (b) the surrounding area of the city was damaged by the same hurricanes so were concurrent causes, each of which was, by itself being sufficient to cause the relevant business interruption but neither of which satisfied the ”But for” test because of the existence of the other.

In short, Prevention to access trading premises as a result of COVID-19 guidelines were concurrent causes for business interruption. You would not have been prevented from access to your trade premises had COVID-19 not arisen, causing the “Stay home” and social distancing instructions.


Firstly, it must be placed on record, the insurers involved with this vital test case scheme volunteered to be party to the matter under a framework agreement on 1 June 2020. With over 370,000 potential claims worth in excess of £1.2 billion, it was recognised that both the insurers and the policyholders needed clarity. Indeed, two working groups were also allowed to join the case as interveners.

Putting it bluntly, the insurance companies lost and have been ordered to treat COVID-19 as a notifiable disease for business interruption purposes. Indeed, the court said, “It is hoped that this determination will facilitate prompt settlement of many of the claims and achieve very considerable savings in the time and cost of resolving individual claims.”

Should you have an insolvency-related issue then please contact me at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at

What superpower would you have if you could?

What superpower would you have if you could?  Invisibility? Being able to fly? Teleportation?  Or how about being able to re-write the law to suit yourself and ensure you are always on the right side?  That’s exactly what the government has done with two measures in the Finance Act 2020.


The first is the position where HM Revenue & Customs rank for dividend purposes.  For insolvencies commencing after 1 December 2020, HMRC shall rank as a secondary preferential creditor for the majority of taxes owed by the insolvent party where that party has acted as a collector of taxes.  This includes PAYE, VAT, CIS and employee’s NI contributions (but not any penalties associated with those debts).  “Secondary preferential” means their preferential status ranks after existing preferential claims (generally employee claims for wages and accrued holiday pay) but in priority to the holder of floating charge security.  HMRC will remain an unsecured creditor for other taxes including corporation tax and employer’s NI contributions.  To summarise, HMRC have therefore jumped to pretty much the top of the priority order in one fell swoop.


As a direct result of this, The Association of Business Recovery Professionals estimate that future new lending by banks will be £1 billion less, making recovery and turnaround harder.  To make things worse, the ability to use a formal insolvency vehicle (such as a company voluntary arrangement) may no longer be a viable option asthe unpaid taxes rank ahead of the general body of creditors, reducing the amount available to unsecured creditors.  Furthermore, it is likely there will be a significant HMRC debt as generally HMRC are the first creditor businesses and individuals stop paying – indeed this is one of the Government’s main reasons for introducing the measure.


The second new measure contained within the new law is where HMRC can issue personal liability notices against company directors following tax avoidance and evasion penalties and repeated insolvencies.


There are various conditions which must be met before HMRC can issue personal liability notices, but all involve scenarios where the company is insolvent (or likely to be).  In the tax avoidance and evasion cases, the directors can be held liable for all of the tax avoided (and any penalties as a result).  However, in the circumstances following repeated insolvencies the directors can be held liable for debts of the failed companies as well as for any future tax debt of a new company.


Before you come over all Lance Corporal Jones (Don’t Panic!) this legislation is aimed at those who act in a deliberate manner of tax avoidance/evasion.  It is not aimed at those who have missed the payment deadline for this month’s PAYE (provided you do still pay that is) or your overall circumstances demonstrate, as a director, you have acted honestly and fairly to creditors as a whole.


Having said that, the key message that should be derived from this legislation is if you feel there is an increasing difficulty in managing the company tax affairs, or liabilities as a whole, then seek early advice.  Creditors, including HMRC, are generally understanding where they learn of a possible issue at an early stage rather than wait until the need for enforcement procedures commences.  In addition, the earlier advice is sought the more options there are available.


Anyone with an insolvency related issue can contact PBC on 01604 212150.  Our initial consultations are always free, confidential, impartial and no obligation.

Jamie Cochrane

The Preference Trap?

Jamie CochranePBC Logo

My most recent blog on the Chancellor’s support schemes  (available here) included comments on the Bounce Back Loan scheme.  One question I have received following that blog focussed on how using the funds from the loan to pay off debts personally guaranteed by the director would be treated (as the Bounce Back Loan scheme does not involve any personal guarantee) and I thought I would take the opportunity to explain the situation.


The Insolvency Act 1986 states “a company gives a preference to a person if that person is one of the company’s creditors or a surety or guarantor for any of the company’s debts or liabilities and the company does anything…..[which puts] that person which, in the event of the company going into insolvent liquidation, will be better than the position he would have been if that thing had not been done”.


So let’s unpick that legal jargon for a moment by revisiting the scenario.  The director was a guarantor for a company debt.  The company did something which put the director in a better position – by paying off the debt which had been guaranteed and removing the potential for the creditor to call on the guarantee.


However, that is not the whole situation.  The liquidator has to prove three things:


  1. The transaction took place at a relevant time. As the director is a connected party, the transaction must have taken place in the two years prior to the liquidation.


  1. The company must have had the desire to prefer the individual who received the preferential treatment. As the director is a connected party, this desire is presumed (but can be rebutted by the director).


  1. The company was insolvent at the time of the transaction or as a result of the transaction. Clearly, this fact is subjective on the facts of each individual case.


Let’s return to our scenario.  Could the company have taken out a bounce back loan to repay other business borrowing (whether or not guaranteed) to take advantage of the low interest rates on the Bounce Back Loan versus their existing borrowing?  Therefore, the director may argue that the desire was not there as they were seeking to improve the cash-flow of the business, but that argument would be stronger if contemporaneous notes (something I strongly advise) were made explaining the thinking behind the transactions, particularly as such transactions may be challenged several years later.


As previously stated, each scenario will depend on its own facts.  Should you be worried about your position or you have another insolvency-related issue then please contact me at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at