Lies, Damn Lies and….

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Most readers are probably smirking as they finish the quote in the heading.  However, talking statistics, The Insolvency Service has released the latest statistics relating to registered company insolvencies in December 2021. Commentary – Monthly Insolvency Statistics December 2021 – GOV.UK (


In total there were 1,486 companies that registered as insolvent during December.  Of these 1,365 were voluntary liquidations, which is 73% higher than December 2019.  What is probably more concerning is that the principal rescue procedures of administration and company voluntary arrangement only numbered 79 companies, being 49% and 67% down respectively on December 2019 figures.


The remaining 42 companies all fell into compulsory liquidation, which is a 75% fall in numbers as compared to December 2019.  However, this is understandable as a moratorium over most winding up petitions was introduced by the Corporate Insolvency & Governance Act (“CIGA”) and, new tapering measures were introduced from 30 September 2021 when the moratorium was to be lifted.  This will continue to have a direct impact on post CIGA moratorium winding up petitions for the interim.


To add to the above numbers, two new procedures were introduced that were designed to assist safeguarding businesses.  However, in the 6-months ended 31 December 2021 the company moratorium numbered just 15 while the restructuring plan only 10 of which two concerned parts of the Virgin Group of Companies.


No doubt there will be plenty of analysts who will draw their own conclusions as to why there seems a disproportionate number of liquidations as opposed to rescue procedures.  At PBC we have considered this and summarise our opinion of the key reasons as:


  1. There is not a viable core business to save.
  2. The secondary preferential status, now enjoyed by HMRC, acts as a block to any opportunity of a return to the general body of creditors.
  3. Creditor frustrations are at such a level they will not entertain proposals for restructuring/saving the business.
  4. The procedural costs are sometimes prohibitive when compared to the company liabilities.
  5. Due to various legal and technical reasons, it is more constructive to look at a “Phoenix” and start afresh,


Much of the cause for the above issues also stems from that long-running problem of directors not taking early advice.  At PBC we fully understand it is a very difficult step to take in calling our offices and seeking help, but it cannot be a coincidence that those early callers generally find they have more options available to them and invariably matters can be addressed in a more orderly  & positive manner.


Should you have an insolvency-related issue then please contact a member of the team 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


The Association of Business Recovery Professionals (R3) which is the trade association for the United Kingdom’s insolvency profession, has launched a standard form of proposal (Standard Form) for company voluntary arrangements (CVAs) in light of the COVID-19 pandemic and the subsequent negative economic implications on businesses, especially small and medium-sized enterprises (SMEs). This has been prepared after consultation with insolvency professionals.


A CVA is a statutory agreement between a company and its creditors. It allows the company to come to an arrangement with its creditors over payment of its debts or to pay only a proportion of the debt it owes, while continuing to trade. A company can only arrange a CVA through an insolvency practitioner and is required to show that the company is still viable as a going concern. The CVA must be approved by 75 percent (by debt value) of the creditors who vote. CVAs are legally binding on all unsecured creditors and will typically last from one to five years (although there is no legal limit). Once the CVA has been entered into, the company will need to make the scheduled payments outlined in the CVA.


Key features of the Standard Form include:

• A delayed period before payment of 100 percent of the company’s debts (which R3 suggests should be six months). The duration of the delayed period will predominantly depend on the specific circumstances and creditors of the company, and the time periods suggested in the Standard Form should be viewed as guidelines only.
• An explicit statement that the company is experiencing financial distress due to COVID-19 and for which the company will have to provide supporting details of its circumstances.
• New trading costs incurred during the CVA are to be paid out of new trading income and support from the UK government, where available.
• An additional introductory period of a maximum of three months, designed for companies that are still unable to restart their operations following the initial UK lockdown that began on 16 March 2020.
• A moratorium against creditors enforcing their historic pre-CVA debts during the “introductory period” and the “breathing space period” of the CVA. The Standard Form also includes mechanisms to extend these periods.
• During the CVA, a number of restrictions will apply to the company’s operations, including declaring dividends, increasing directors’ salaries and borrowing or selling the company’s business or assets (save in the ordinary course of business) without the consent of the CVA supervisor (the supervisor) or creditors.
• The ability to suspend payments if the company is located in an area that is currently under a local lockdown (such as businesses forced to close if they are in Tier 3 area).
• The ability to seek further decisions if more significant changes become necessary due to COVID-19.
The main advantage of the Standard Form is the moratorium placed on creditors, which gives the company some breathing space before its creditors can enforce their debts against it. The Standard Form can also be used in conjunction with the new moratorium for businesses introduced by the Corporate Insolvency and Governance Act 2020.
It is important to note that the Standard Form is not “one size fits all.” The Standard Form is also not intended to replace professional advice. Rather, it is intended to provide a foundation, which will save time and costs and make CVAs more accessible for SMEs.


Although CVAs are a bespoke process, the Standard Form will undoubtedly aid SMEs considering the CVA process. With the number of company insolvencies set to increase in the United Kingdom over the next few months, it is likely the Standard Form will be a useful tool for SMEs to set the foundation for further negotiations with creditors.
That being said, it should be noted HMRC will fall into the definition of “secondary preferential creditors” from 1 December 2020 under the Finance Act 2020. If a company owes a large debt to HMRC, then any proposed CVA will most likely fail. Whether this leads to a decrease in CVAs after 1 December 2020, or if the UK government will intervene in light of COVID-19, remains to be seen.

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

Is Corporate Recovery Doomed?

There is a saying about giving with your right hand but then take back with your left.  Well, that appears to be the case where the Government are concerned.

Firstly, the Corporate Insolvency & Governance Act 2020 became law and is intended to assist businesses recover post the COVID-19 pandemic.  While I am sceptical about this, any remote positivity was dashed with the Finance Act 2020 receiving Royal Assent on 22 July 2020.  The significance of this is the re-introduction of Crown preferential status on all insolvencies.  This is despite significant objection from various parties and some MPs.

With effect from 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.  Therefore, 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.

As a direct result of this, The Association of Business Recovery Professionals estimate that £1 billion of potential lending will be removed, making recovery and turnaround harder as the access to new working capital is reduced.  To compound the recovery difficulties, whether a business can secure fresh borrowing or not, using a formal insolvency vehicle (such as a company voluntary arrangement) may no longer be a viable option.  This is due to the unpaid taxes ranking ahead of the general body of creditors and having to be fully paid before those unsecured creditors receive any funds.  Furthermore, it is likely that there will be a significant HMRC debt as our experience is HMRC are the first creditor to go unpaid during any cash-flow crisis – indeed this is one of the Government’s main reasons for introducing the measure.

On first glance, Crown preferential status will only impact those where the insolvency commences on or after 1 December 2020.  However, a cynic would point out there may not be any appetite for HMRC to support the restructuring of a business prior to this date where they remain an unsecured creditor, ranking with creditors as a whole.

Should you have an insolvency-related issue or a corporate dispute 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


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.

What is a Voluntary Arrangement?

Voluntary Arrangements (VAs) are not a universal panacea for financial difficulties but they can be a way of resolving your financial issues to the satisfaction of everyone concerned. In this video licensed insolvency practitioner and director here at PBC, Gary Pettit, will explain what a voluntary arrangement is and what it can do.  Many people are aware of the basics of a VA but are unsure of a range of specifics such as can a company have a voluntary arrangement and do all creditors have to abide by the terms of a voluntary arrangement?  Gary will answer some of the more common questions we are asked about VAs and how they are used.

PBC announce large dividend paid from company voluntary arrangement

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PBC are pleased to report on the recent payment of a dividend from a company voluntary arrangement (“CVA”).


After consulting with a financial consultant and seeking advice from PBC, the company proposed a CVA to its creditors which was approved with modifications in December 2013. The arrangement consisted of a splitting of the company into two distinct trading entities which included the saving of the majority of the employees’ jobs.  The arrangement included the sale of assets and contributions from future profits.


Recently, the directors of the company approached the joint supervisors regarding the possibility of varying the arrangement by settling the outstanding amounts due in respect of the monthly contributions and the sales consideration by way of a lump sum payment. The variation was approved by creditors who have now received a distribution earlier than originally expected.  The joint supervisors have distributed over £92,000 to creditors.


Joint supervisor Gary Pettit said, “It is always pleasing to be involved in the rescue of both a company and the saving of jobs, both of which have happened in this case. The directors sought advice at an early stage which resulted in the possibility of a rescue option being available to them.  This has allowed the company to turn around its financial situation.”