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 garypettit@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk

Seller beware? – The Corporate Insolvency and Governance Bill

CashflowAs a service provider or supplier, what is your first reaction when you hear your customer is entering into an insolvency process?  Anger, frustration, can I recover items supplied or, how do we make good the financial hole that bad debt will create?

It is an emotional event but, what if you were told your termination clause is no longer enforceable or you must continue to supply the insolvent customer?

On 4 June the Corporate Insolvency and Governance Bill (“The Bill”) received its second reading in Parliament and it is envisaged to become law by the end of June.  It will introduce some temporary provisions (to cover the COVID-19 lockdown) that will have retrospective effect and some permanent law, which is the focus of this editorial.

So, let us explore the four key provisions that are all aimed and restructuring and rescuing a company:

Restructuring scheme

This appears to modernise the current scheme of arrangement available under the Companies Act.  It is most likely a tool used for complex debt restructuring where there are several classes of creditors.  For example, a retail chain where there are suppliers, employees, landlords and financial institutions that are likely to be affected in differing ways.

The big reliance of this scheme is, what has been referred to as “Cross-class clam down”.  Try saying that quickly!  What this means is classes of creditors may out vote a dissenting class of creditor, provided the dissenting class of creditor will not be worse off than if an alternative insolvency procedure was used.  This does represent a shift in the balance of power in creditor voting


This is the largest part of the Bill and sets out a new provision designed to give an “Eligible company” the opportunity of a short holiday from creditors while it looks at ways to restructure its business.

Where a company is not subject to any insolvency proceedings the directors can file an application at court for a moratorium, without any notice to creditors.  The moratorium comes into force immediately upon the application being filed at court.

So, what does this mean?  A moratorium has very similar effects to administration whereby creditors cannot enforce any security held, landlords may not exercise their right of forfeiture or peaceable re-entry and any legal processes may not be commenced or continued.

The initial period will be 20 business days (this maybe increased to 30 business days for “Small companies”).  The directors may extend it for a further 20 business days, or with creditor consent it can be extended for up to 12 months.

While it needs an insolvency practitioner involved (to be called, “The Monitor”) their position is generally to monitor the company during this period, primarily based upon information provided by the directors.  It is envisaged a moratorium will be used as a form of protection while the company considers and/or proposes to enter into a company voluntary arrangement, although it could result in the outcome looking more terminal whereby liquidation may be the outcome.

Any supplier who supplies the company during the moratorium period must be paid (or payment provided for) otherwise the moratorium should be terminated.  Once terminated, any unpaid post moratorium creditors will enjoy a “Super priority” in the subsequent insolvency procedure.  However, that could be small consolation if there are no distributable assets!

Ipso facto clauses

Okay, most of us will ask what that means and does it apply to me?  In English, this is a clause within your terms and conditions of trade that state the contract shall terminate upon the customer entering into any form of insolvency.

A new section 233B is being inserted into the Insolvency Act whereby such termination clauses shall be considered void and no longer be enforceable.

Continuation of supply

The Insolvency (Protection of Essential Supplies) Order 2015 already prohibits suppliers from refusing to supply an insolvent company and/or seeking to vary the terms as a condition of continued supply.

However, the Bill takes this further and makes it clear it is unlawful to hold out for ransom payments (ie demanding pre-insolvency debts are paid as a condition of supply).  This could cause some practical difficulties, including if you have credit insurance, yet pre-insolvency you had reached the credit limit with the insolvent company.  The only protection it appears you have is being told your post insolvency debt shall be paid as an expense of the moratorium period or, failing that, holds “Super priority” in the subsequent insolvency.  Small comfort, I would suggest.

The key message for suppliers is to keep track of your customers (in terms of the warning signs leading to failure) and ensure they stay within credit limits you feel comfortable providing.

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 garypettit@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk

Recession or is it something else?


What is the outlook for the UK economy post lockdown?  That is a question I have been asked many times, while others tell me how busy my profession will be.

The truth is, nobody can accurately predict what will happen.  Personally, I have heard views from, “It is going to be a tough time, but we will get through it,” to others predicting 800,000 – 1 million businesses will fail over the next 12-18 months.

Before we look forward, let us look back.  I have worked through two major recessions, being 1990 and 2008.  The first of these saw UK officially enter recession at the end of the 4th quarter of 1990.  Corporate insolvencies were up 44% in 1990 (from 1989) with the level of failures increasing with 1991 being 60% higher than 1990.  A further increase was suffered with 1992 being 72% higher than 1991.  While numbers dropped in 1993 corporate failures still totalled 26,316 as compared to 18,720 in 1990.

You then compare that with the 2008 recession which was entered at the end of the 3rd quarter of 2008.  2007 had seen 15,774 corporate insolvencies, rising in 2008 to 21,082 (an increase of 34%). 2009 saw this figure further increase to 23,979.

What the 1990 and 2008 recessions told us is the peak of business failure may well arise a year or two after officially entering recession and levels remain high for a year or two after the peak.   However, this looming crisis is likely to be different to those past recessions.

While we may officially enter recession in the 3rd quarter, it is likely corporate failures will start to rise immediately as opposed to previous trends of corporate failures rising in the wake of a recovering economy.  The principal difficulty will be cash flow as most industries will find themselves back at pre-lockdown operational costs (including salaries as furlough ceases) but also, some will have the additional burden of servicing the bounce back and business interruption loans, as well as any deferred tax payments.  All this cost pressure will be challenging when it is anticipated “Normal” levels of turnover may not return for some time.

In saying the above, it would be remiss of me not to mention corporate insolvency numbers fell by 8.5% in the 1st quarter of 2020 (as compared to the corresponding quarter of 2019).  However, this maybe artificial as according to a well-known high court judge I spoke to recently, the working hours of the courts have been reduced with only 40% employment retained and winding up petitions have fallen by 85% principally as a result of HMRC ceasing enforcement action on standard unpaid tax matters.  Many other petitions have been adjourned under temporary COVID directives so there could be an explosion of activity once UK starts getting back to a semblance of normality.

This may all appear to come across as negative but overall the UK economy has the strength to recover and the services provided will continue to be in demand worldwide.  The key messages readers should take from this are:

  1. Continue to monitor your cash flow without a “Salesman” eye. Be critical and challenge the numbers.
  2. Review your overhead structure to see where reductions and removals are available.
  3. Take early advice from your accountant, solicitor and, where appropriate, an insolvency practitioner. Best anticipate a problem rather than have to deal with problem that has arisen.
  4. 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 garypettit@pbcbusinessrecovery.co.uk or access our website at pbcbusinessrecovery.co.uk


Tax efficient or tax avoidance?

As a director you are probably advised to pay yourself a nominal salary with the balance of your remuneration package being paid by way of dividend.  This is perfectly sensible.  It reduces the tax burden and improves cash flow.  However, what happens if you draw dividends when there are insufficient reserves?

There has been a long-running debate on whether dividends are unlawful when there are insufficient reserves to cover them.  Some commentators (like me) always took the view if a director followed independent and professional advice and the payment of dividends was a tax-efficient way of paying remuneration then it should be fine.  Indeed, in recent years court decisions on various matters (such as wrongful trading or malpractice) have generally looked at the position and adopted the view if a person took independent advice and followed it then they have done what any reasonable diligent person is expected to do, irrespective of whether that advice is flawed.

The above approach was continued in a case that was brought before the court where a sole director had drawn some £23,000 in dividends over a financial year.  The company went into liquidation with a deficiency in excess of £173,000.  It was recognised the director took independent advice and acknowledged if there were insufficient reserves then he would have to adjust his remuneration back to salary and account to HMRC for the PAYE/NIC as appropriate.  The court adopted a practical, common sense opinion and the claim against the director was dismissed.  The Applicant (who had “Purchased” the action from the liquidator) appealed.

In Global Corporate –v- Hale [2017] EWHC(Ch) the appeal over-turned the earlier decision, saying,

“If it looks like a dividend and sounds like a dividend, it is a dividend.”

The court of appeal added further clarification in order to clear the waters muddied by the High Court by reaffirming:

  1. Companies must have sufficient reserves to pay dividends at the time they pay them, whether or not they intend to rectify any deficiency at the end of a tax year;
  2. Quantum meruitwill not act as a defence or set off to claims made by companies against their directors;


Personally, this decision does not sit well.  After all, in some cases directors may have been taking dividends when something that could not have been reasonably envisaged extinguishes the reserves, automatically making those dividends unlawful.  That, to me, is using the benefit of hindsight, something the courts have frowned heavily upon in the past, making the Global decision a little contradictory.  I am sure there will be some that disagree with me on this but is that not what freedom of opinion is all about?

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 garypettit@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk

How secure is your company?

How secure is your company?

A few years ago I asked an audience, “How many of you are self-employed?”  I followed that by then asking, “How many of you set up in business and planned to fail?”

The fact remains we do not set up a business with a view it will fail sometime in the future.  So, why is it we do not take steps to protect our company from any unfortunate incident that may fall upon its leaders?  Possibly because the UK business person is universally recognised as the poorest when it comes to discussing incapacity, or worse.

Perhaps 99.9% of companies that are incorporated adopt the standard articles of association (“Articles”) which governs the company in terms of directorships, voting and all other specific areas of corporate governance as laid down by the Companies Act.

Recently, I was asked to advise where the company operated with a sole director and shareholder.  Unfortunately, that director was injured in an accident, incurring a serious head injury.  As a result, personal injury claims were being prepared, which included a doctor providing a report stating the director was suffering from mental incapacity.  The problem is the Articles state:

“A person ceases to be a director as soon as—

(d) a registered medical practitioner who is treating that person gives a written opinion to the company stating that that person has become physically or mentally incapable of acting as a director and may remain so for more than three months;”

Taking the above into account that particular company now has nobody with authority to operate the business and without  applying to court for the appointment of a personal representative (which can take several months) it is rapidly descending into a financial chasm, leading to its eventual demise.

The above should be a telling tale, if not a warning, for all those small, single director companies.  You should ensure there is a second director registered at Companies House.  This could be your spouse, although couples do have a tendency of travelling together so, try to consider a different person.  Alternatively (or simultaneously) consider a power of attorney whereby someone has the power to protect the company’s interests by (say) appointing a replacement director or being able to ensure trading can be sustained, thus protecting the share value, being a legacy you may wish to leave for your surviving family members.  It is also worth considering appropriate insurance protection as key personnel invariably need to be replaced if the business is to remain viable.

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 garypettit@pbcbusinessrecovery.co.uk or access our website at www.pbcbusinessrecovery.co.uk

A Stark Lesson

How many readers find themselves looking at how much to pay in order to service personal debt every month after you have just been paid? In some cases that level reaches a point where it simply cannot be managed where you then start to notice those road-side signs that promise to write off 90% of your debt a little more.

Some will ignore those assurances and seek advice early. This could result in an application for your own bankruptcy where others will consult with an insolvency practitioner (“IP”) with a view to entering into an individual voluntary arrangement (“IVA”).  An IVA is, in laypersons’ terms, a deal with your creditors that is regulated and is a settlement in full and final satisfaction of your liabilities.  Indeed, over the past six years IVA have consistently outnumbered the number of bankruptcy orders, demonstrating more people are looking to resolve their debt burden.

However, a far greater majority of people look towards debt management plans (“DMP”) as their solution. While I have my own misgivings, for many people a DMP works and they get themselves back on a level footing.  Unfortunately, I have also seen many where it does not work and those people end up going bankrupt or, in some cases, enter into an IVA.

One issue that arises with companies who offer DMP is the lack of “Insolvency-like” regulation. Every IP has to be licensed through a professional body and are regulated by statute, their professional body and the Government through the Insolvency Service.  IPs also have professional guidelines to follow and are insured so there is recourse if things go wrong.  If you are wondering why you should take heed of this fundamental difference then you only have to look at the recently reported case of Gregson and Brooke Financial Services Limited and One Tick Limited.

Both Gregsons and One Tick offered a debt management service where clients would pay into a DMP. Clients complained to the Financial Conduct Authority (who governed both companies) that despite paying into their DMP their debt was increasing.  After some initial enquiries by the FCA both companies went into administration after which it was discovered the directors had withdrawn some £652,000 of client money for their own benefit.  While all four directors have been disqualified as directors, the true victims are the debt-ridden clients who now find they are in deeper financial trouble than before, despite making significant debt repayments; payments that would have been covered by IP insurance under a formal insolvency procedure.

The Association of Business Recovery Professionals have been so concerned with this (growing) problem they have published two guides:

“Don’t be misled by advice from an unlicensed advisor”

“My business is in financial difficulty”

These can be found on the Association’s website (www.r3.org.uk) or on our website at www.pbcbusinessrecovery.co.uk/Links/

In short, if you find yourself in a position where the ability to service your debt is getting to (or has reached) a point of no return seek professional advice from an IP. With most practices, the first consultation is free of charge and could save you a lot of stress, anguish and, like the poor victims of the above companies, expense.

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.


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”.

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.


When do I need an Insolvency Practitioner?

Do have a dog but try to bark yourself? They (dogs) are pretty good at it and are certainly better than me so I tend to let them do what they are better at!

So, why is there an apparent reluctance to consult with an insolvency practitioner (“IP”) until the very last minute, if at all? I will say now I have a huge amount of respect for those who come to see me.  After all I am a stranger to them and they are being asked to reveal all of their issues on a point of trust I may steer them in the right direction.

Some of the subjects we have been approached to assist on include:

  • A customer has gone insolvent and the creditor is unaware of their rights or need guidance on the meaning of documents received.
  • A business is being handled by an administrator (or liquidator) and you are interested in the acquisition.
  • The IP is telling you that the goods you supplied are going to be sold for the benefit of creditors as a whole but what are your rights?
  • An IP is threatening me with all sorts of monetary claims.
  • My credit card and other domestic debts are out of control.
  • Our company is in financial difficulty.


The insolvency business is a highly specialised area with less than 1,100 appointment-taking IPs in the UK. The governing legislation provides some immense powers such as lifting the corporate veil and pursuing company officers personally for losses resulting from their conduct, the rights of landlords or suppliers can be controlled, or even prevented.  Contacting an IP at an early stage may make the necessary route you need to take smoother, it may even mean you have more than one option.  Leaving it until things are getting to a critical level often leads to a very costly and damaging outcome.

For those who need convincing, in a case I am looking at a gentleman tried to handle a bankruptcy petition that had been presented against him in person. Because he did not appreciate the court procedures he ended up being made bankrupt.  His asset value (home and land) is over double that of his principal debts but he is now facing the prospect of losing his home in order to clear the bankruptcy and the costs inherent with bankruptcy.  Had he taken timely advice this could have been avoided and the anticipated cost a fraction of what they are now going to be.

So, the message is clear. IPs are not monsters and are there to bark for you when the highly specialised subject of insolvency comes looming.

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.