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.

 

PBC announce interim dividend from an IVA

PBC are pleased to announce an interim distribution from an individual voluntary arrangement.

The debtor’s proposals were approved by creditors with modifications on 29 June 2016. The debtor has proposed monthly contributions together with 50% of commissions earned over £500 to her creditors, which are currently up to date.  The proposals anticipated dividends to creditors at each anniversary of the arrangement and I am pleased to report payment of a first interim dividend of 7.60 pence in the pound, as estimated, to unsecured creditors.

The debtor’s monthly contributions are continuing to be monitored, together with her commissions earned and a second interim dividend of 10 pence in the pound is expected to be made to creditors at the second anniversary of the arrangement in June 2018.

For more information on voluntary arrangements, please see the video here.

What is the difference between Corporate and Personal Insolvency?

When you realise you are potentially in a position where you or your company is insolvent you will need to take action as soon as possible. It is sadly not uncommon for corporate and personal insolvency to be bedfellows, but they are different so you will need to make sure you are approaching it from the right perspective. One of the very early discussions we often need to have with our clients is the difference between their personal and corporate financial responsibilities. Kym Carvell explains how to answer the question ‘what is personal insolvency’ and the difference between that and corporate insolvency in this video. She also discusses some of the confusion surrounding the liability status of sole traders and the common reasons why some companies can become insolvent.

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.

Personal Insolvency Rates – Women Overtake Men

figures

Every quarter the Insolvency Service produce statistics which confirm how many businesses fail, broken down by insolvency type:, liquidations (whether they are compulsory or voluntary) administration or company voluntary arrangements (CVAs).

At the same time similar statistics are released for individuals, divided into bankruptcies, debt relief orders or individual voluntary arrangements (IVAs). There are very few details about the number of debt management plans.

When these are released, the details will always make that day’s news and as is normal with the media they focus on the worst points.

In general terms, corporate insolvency appointments have been failing from their recent highs reached during the financial crash in 2007/08 (although failures were much higher in the early 1990’s). Personal insolvency appointments have also been falling, although in the last year there has seen a steady rise. Historically men have always had higher rates of insolvency than women but since 2014, women have overtaken men.

Once a year the Insolvency Service produce more detailed personal insolvency statistics. The main headlines are:

  • The total insolvency rate increased for the first time since 2009, and increased in all regions of England and Wales between 2015 and 2016.
  • The North East continued to have the highest insolvency rates, while London had the lowest.
  • Nine out of ten local authorities with the lowest insolvency rates were in London or the South East, whilst seven out of the ten areas with the highest rates were located in coastal areas.
  • Insolvency rates increased for all age groups except 55 and over, with those aged between 18-44 showed the biggest rises.

 

When I review these figures I am always interested in the details. For example Corby has been in the top 10 of the worst local authority areas in terms of personal insolvency rates.  As mentioned above the majority are seaside towns which have their own issues due to the seasonal economies in which they operate.  Being based in Northampton we are aware that Corby still has elements of poor families struggling to make ends meet in low paid jobs.  In our experience these will often be cases in which credits cards and loans have been built up, possibly in a period when there has been a loss of income or ill health or just simple overspending.  Commonly once the debt has been built up they find it almost impossible to repay the debt because of the low income and so a downward spiral begins.

So what can the individual do?

The first thing required is to be honest with yourself and the situation. Sit down and summarise who you owe money to and how much.  Next produce a budget detailing your income and necessary spending.  Hopefully this should leave a surplus and you can then plan how to reduce your debt using this surplus.

You may find you need additional help and PBC have always offered help to individuals and will outline all the options open to them from refinancing, a debt management plan, IVA’s and bankruptcy, alone with many others. Our advice is simple: take action as soon as possible rather than leaving it too late.

Initial meeting are free of charge and confidential. We hope to understand your position, answer your questions and lay out the options available to you in order for you to consider which is the best way forward for you.

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 announces successful completion of two IVAs

PBC Business Recovery & Insolvency Ltd are pleased to announce the recent successful completion of two individual voluntary arrangements (IVA).keys

The first of these was the IVA of a solicitor who was confronted with multi-million pound debts as a result of a firm of solicitors (of whom he was a partner some 2 years before) entered into partnership administration. PBC’s solution was the best outcome for both the creditors and the debtor, who was able to retain his ability to practice as a solicitor.

The second IVA saw creditors receive payment in full plus statutory interest. The terms of the IVA enabled the debtor to pay affordable contributions over a five year period rather than attempt to meet the demands of various credit card companies.  In addition, the IVA also enabled the debtor to retain his family home.

At PBC Business Recovery and Insolvency we can advise you whether an IVA is appropriate. If appropriate, we will firstly assist you with the preparation of the proposal and then act as nominee and convene the meeting of creditors.  Should the proposal be approved, we will then act as supervisor.

We can also act on behalf of creditors who have received IVA proposals prepared by other insolvency practitioners. If necessary, we can advise on whether the proposal should be accepted or modifications proposed and if necessary arrange attendance at any meetings of creditors.

If you have personal debt issues, PBC Business Recovery & Insolvency offers a free one hour consultation to discuss your situation and the possible options available.  Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.