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 Bankruptcy?
Personal insolvency, including bankruptcy is something that nobody wants to face. In this video Gavin Bates, one of our directors , explains a little more about what insolvency means, other options to potentially avoid bankruptcy and what could happen if you do need to take the bankruptcy option. Many people come to PBC with questions such as ‘will I lose my house if I take bankruptcy’ and ‘what about my car and other basic needs’ these are difficult questions and the answer will vary depending on your circumstances but we will work with you to make life improve as fast as possible. For many people, the relief of seeing a solution to their issues is the first sign that they are re-stabilising their life and turning the corner towards becoming solvent again. While the road may still be difficult (and we may not always say what you want to hear) talking and taking some advice could be the first step on your journey.
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.
So what went wrong?
“If you fail to plan then plan to fail”. A well-known phrase that everyone in business should have hanging in a prominent place as a reminder that operating a business carries risk as well as reward.
Nobody takes that brave leap into being self-employed thinking their business will fail within the first two years. However, many start-ups find themselves in difficulties within this time frame, generally as a direct result of a failure to plan. I appreciate I will not win many friends by saying this but the business acumen in this country is poor and the general knowledge required absent. If I had a pound for every time a director referred to the assets of a limited company as his assets when they are actually company property………
Putting it another way, if you build a house on poor foundations then you can expect that house to fall down eventually. Similarly, if you do not start a business on sound footing from the outset you are promoting failure.
This article could dominate several pages if I were to go into any real detail but, generally speaking common areas leading to difficulties in the near future of a start-up include:
- No business plan (including cash flow forecasts) from the outset. If you have a business idea then putting that down in writing should inform you if that idea is viable and what is likely to be the requirements. It also supports any application for third party funding, such as from banks.
- Choosing the wrong trading vehicle (e.g. limited company, partnership etc.).
- Over-borrowing from the outset, leaving start-up costs creating a financial commitment that eventually becomes a burden too great.
- Not registering for VAT or PAYE. In one case I handled the company had been over the VAT threshold requirements for three years yet was not VAT registered. It was one of the grounds for him receiving a custodial sentence!
- Not accounting for receipts and payments properly.
- Entering into contractual obligations without fully understanding the implications.
- No trading terms and conditions upon which to fall upon when things go wrong.
- Not monitoring cash flow. Most business failures have reached a stage where cash is exhausted so they cannot pay the bills.
The advice to any would-be new business owner is to take advice. Speak to an accountant who can help you determine what the appropriate trading vehicle for your business is, assist with VAT registration and guide you through how to ensure your day-to-day accounting is correct. Equally, a commercial solicitor can draw up your terms of trade that maximise protecting your business interests and can steer you with regards to any agreements you are asked to sign. Finally, do not overlook the role of commercial banks as they can assist in the most appropriate form of funding the business, both at start up and going forward.
I use a phrase, “You do not have a dog and yet bark yourself.” Unfortunately, all too often business people come to me and it is clear they have not grasped that concept.
If you require any advice or assistance on mediation matters, or any other insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss your situation. Call Gary Pettit or Gavin Bates on 01604 212150 completely confidentially.
PBC announce dividend from liquidation
PBC are pleased to report that having already paid preferential creditors in full a dividend of 9.72 pence in the pound was paid to unsecured creditors of GLA Stroud Limited when it was anticipated no funds would be available.
The company was placed into creditors’ voluntary liquidation on 4 June 2014 after the preceding company voluntary arrangement it had entered failed due to circumstances out of its control.
Joint liquidator, Gary Pettit, said, “Asset realisations in any construction industry insolvency can be complex but in this case they were significantly higher than originally anticipated with the retentions due to the company being recovered with the assistance of Leslie Keats. Also, book debt recoveries were at 95% of the ledger which was achieved by pragmatic negotiation and assisted by good record keeping by the company in the first instance”.
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.
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.
Northamptonshire Business Leader to Take Centre Stage at National Awards
A leading Northamptonshire businessman will take centre stage at national awards that will take place at Wembley stadium.
Gary Pettit, the managing director of PBC Business Recovery has been selected as a judge for the SME National Business Awards 2017 which were launched in July 2017 as a result of the continued success of the SME Business Awards around the UK.
The awards are directed at SMEs which at 98% of all businesses are the main engine of the UK economy.
“I am delighted both personally and for PBC Business Recovery that we have been asked to undertake such an important role in this influential and prestigious Awards.” said Gary.
PBC Business Recovery and Insolvency is a specialist business rescue and insolvency practice that provides practical, helpful advice and solutions to a variety of businesses and individuals with financial problems.
“Entering awards are a fantastic way to grow any business.” Gary continued. “An SME only needs to reach the finals of the awards to experience their profile and their promotional opportunities.”
“This is a great opportunity for SMEs from across Northamptonshire to get to Wembley later this year and be part of an amazing evening that will see the cream of UK business crowned.”
Businesses can enter up to 3 categories. There will be a selection of highly experienced and respected judges and each entry is judged by up to 4 of our panel.
Finalists will be chosen following the preliminary judging and they will be announced online on 4th October 2017.
The awards will culminate in a glitzy black-tie final at the iconic Wembley stadium on 1st December 2017.
The evening of celebration will recognise all the finalists and allow every business that reaches the final the opportunity to promote their incredible achievement.
Further information on the awards can be found at www.smenationals.co.uk
You can watch a video promoting the Awards at https://youtu.be/SdKLYldl9WQ
What is mediation?
Alternative Dispute Resolution (ADR) is a very successful method of resolving financial and other business issues before they reach the stage of court action. In fact, the courts will often expect you to have tried ADR and may look unfavourably on you if you have not attempted to resolve your issues prior to legal action. One of the most common forms of ADR is to see an independent mediator who could resolve the problem at an earlier stage and save a considerable sum in legal fees and lost time. In this video, Gary Pettit, our in-house CEDR Accredited Mediator, explains more fully how mediation works, what the advantages are and how you could benefit from working with us to resolve your dispute.
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.