Liquidation, Personal Guarantees, and Individual Voluntary Arrangement….

2 men sitting in office in conversation

During  the summer of 2023 PBC Business Recovery & Insolvency were in discussion with a director whose company was to go into liquidation.  It became apparent that he had provided a significant number of personal guarantees to company creditors that would crystallise and, with no dividend being paid from the liquidation, the guaranteed debt would fall on the director in its entirety.  The director was clearly concerned as to the consequences and we provided advice on how best he deal with these liabilities going forward – it was clear that it would be a choice of either Bankruptcy or propose an Individual Voluntary Arrangement (“IVA”)

Given our experience in dealing with personal insolvency and the fact that one creditor would have a significant vote if an IVA was to be approved, we approached that creditor, informally,  with a summary of the IVA to gauge their appetite to agree. We are pleased to report that the IVA was approved in October 2023 and the IVA has now been concluded 6 months on with the funds distributed to all creditors, resulting in the director being able to move forward.

If you require advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss your situation on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

The right advice, part 2

a man and a woman shaking hands

We recently wrote an article in respect of receiving the right advice.

Subsequent to that article we received an enquiry via our website whereby the director had worries about his company’s finances.  As a result, he had sought advice, we were told, from two other insolvency practitioners.

Below is a summary of the position:

  1. Company liabilities were circa £28K to HMRC.
  2. No Bounce Back loans or other Government Covid support loans.
  3. No overdraft facility.
  4. The principal company asset was an overdrawn loan account of circa £47K.

The director claimed those who previously advised him did not mention that the overdrawn loan account would need to be recovered, if possible, in a creditors’ voluntary liquidation and just focused on the cost of the process.

Having asked searching questions of the director it transpired that, whilst he did not have the cash funds to make good some or all of the overdrawn loan account, he did jointly own a property and his share of the equity was circa £100K. At this point it was explained that should the company enter liquidation and given his equity in property; any liquidator would be duty bound to recover the loan account.

As it transpired, he believed his business was viable and could trade on, particularly if he could just get some breathing space. At this point he was urged he speak with HMRC and seek a time to pay agreement together with exploring the opportunity of realising some funds from his equity in property to try and pay in full or in part the loan account and for these funds to help in paying HMRC’s debt.

At the end, the director expressed his gratitude for the full and frank advice provided and would indeed look to trade on as opposed to the apparent pressure received from others to place his company into liquidation.   Unfortunately, this is one of an increasing number of cases where the advice has been inaccurate or incomplete.  At PBC, we understand the pressures individuals and company directors face and it is imperative they receive the right advice, that includes the wider issues that are all too often overlooked.

If you need honest and frank advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss your situation on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Are you getting the right advice?

2 men in an office

A recent news article claimed that business insolvencies were the highest since 1993.

As usual with the media, this report cited the overall numbers and proceeded to break them down into their individual insolvency types. However, at PBC we question how meaningful the breakdown is to the readers.

The fact is, for most companies there are no less than 8 differing formal options available under the Insolvency Act and (following COVID) The Corporate Insolvency & Governance Act. Add the other procedures available for special circumstances and the range of insolvency options increases still further.

Sometimes the option is clear. For example, if a company is solvent and the directors are looking at a solvent wind down (usually for a tax efficient way forward) then you are looking at a member’s voluntary liquidation. However, regularly PBC find the circumstances surrounding a company lend themselves to a wider choice of the options. This is where understanding the business, itself and the issues confronting the company, together with directors’ preference determine the right way forward.

At PBC, we pride ourselves in advising the Directors of the right option for the company. We explain each insolvency type and the reasons why (or why not) that option ought to be considered. Naturally, there are occasions where it is news the directors do not wish to hear (or were not looking forward to their views being confirmed) but often, the advice provided comes as a huge relief and aids removing that “Sword of Damocles” that has been causing stress and sleepless nights.

As Gary Pettit says,

“I have been in this industry for almost 35 years and throughout that extensive career, have often heard directors ask how to place their company into receivership or they need to, “Do a pre-pack”. When I ask them for their understanding, I am met with a blank look as they admit to hearing about that procedure or, a friend told them that is what they must do. It is understandable because insolvency is a highly specialised area with plenty of “Minefields” just waiting for a director to get something wrong. That is where PBC take pride in guiding those directors into adopting the correct way forward, based upon the surrounding issues and circumstance.”

If you need any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss your situation on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Winding up is the solution, right?

Woman sitting at desk using a mouse.

Pay or we will look at winding you up.  This is a threat that many debt collectors and credit controllers use as a means of persuading an errant debtor to pay.  However, at PBC we ask if those threatening such action appreciate the impact of winding up proceedings, both practically and in terms of petition costs that could be in the region of £6-8,000.

Before a petitioner can seek to recover their petition costs as a liquidation expense, the statutory fees must be fully repaid.  These include the official receiver’s fixed administration and general fees of £5,000 and £6,000 respectively.  Equally, the official receiver shall levy a 15% fee on any assets they realise.

In a recent report from the Insolvency Service an average of 10% of all compulsory liquidations over the past 5 years resulted in the official receiver fees being fully covered.  There can be many reasons for this but, ultimately it is suggesting in 90% of compulsory liquidations, the petitioner is writing off the petition costs they have paid out in addition to their original debt. 

There are times where winding up proceedings are justified.  However, a petitioner should also be aware of (and open to) the alternatives that are available.  This maybe creditors voluntary liquidation, where a wider degree of commercial thinking is often employed.  It could also be some form of restructuring that benefits creditors as a whole.  Often, the likes of a company voluntary arrangement will provide to repay the petition costs as an expense while the CVA, itself, offers a better return on your principal debt.

It goes without saying that everyone wishes to be paid for their services or goods supplied.  However, when a company is likely to enter into an insolvency event, reality turns on the question how do I  maximise recovery and does any alternative option being made available achieve that?

If you require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency to discuss your situation on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Solvent liquidations – an end to tax clearance

PBC sign
PBC sign

Solvent liquidations - an end to tax clearance


The most frequent appointments insolvency practitioners have had in recent times are as liquidator of solvent liquidations (“MVL”). Most MVL are where a company’s purpose has drawn to a close, having paid all known liabilities, and the balance of funds are distributed to the shareholders.

In the pre-MVL preparations the company accountant will normally obtain tax clearance. Perhaps an anomaly is the MVL liquidator has also needed to obtain tax clearance before concluding the MVL. This requirement has resulted in many MVL being held open for long periods of time.

However, with effect from 6 December 2023 the requirement for tax clearance in MVL has been abolished. In a statement within their guideline, HMRC made it clear:

“Insolvency legislation requires directors to make a sworn declaration of the company’s assets and liabilities, confirming liabilities plus costs and interest can be met in full in the next 12 months. Directors need to be satisfied that the company’s liabilities, including tax liabilities, are stated accurately in order to confidently make this sworn declaration. Liquidators, company financial advisors, directors and shareholders customarily work closely together in MVL cases to ensure the company’s affairs are wound up as efficiently as possible.”

It is clear HMRC shall rely heavily on the accuracy of the declaration of solvency and the penalties available should it prove to be a false declaration. Therefore, any directors considering entering their company into MVL must ensure all potential liabilities are identified and paid (or secured) beforehand.

If you require any advice or assistance on any insolvency or solvent -related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Pragmatic approach avoids bankruptcy.

2 men sitting in office in conversation

When dealing with formal corporate insolvency appointments, sometimes directors owe funds to the company which, as office holders, we are duty bound to try and recover for the benefit of the company’s creditors.

One recent case being dealt with by our Milton Keynes Office had this very issue, but the director had also provided personal guarantees to company trade creditors totalling circa £300K. One of these trade creditors had also commenced bankruptcy proceedings against the director.  We were appointed liquidator of the company and, following some investigation, explored the prospect of whether an informal ‘full and final settlement’ could be reached in order to avoid bankruptcy and maximise the return to the liquidation and guaranteed creditors. We discussed this with the director and suggested they contact a solicitor who was then able to put the offer to all creditors.

We are pleased to report that all creditors accepted the offer, the settlement funds were received within 7 days and, in avoiding bankruptcy proceedings the director can now move forward.

Should you or a client require any advice or assistance on any insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton) or 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk.

Claims by directors to the Redundancy Payments Service as employees..

In July we posted about employees’ rights to redundancy in an insolvency process and clarified the four main claims employees can make.

This post is aimed at directors who look to make a claim as an employee when an insolvency event occurs. This link Check if you can apply for redundancy payments as a company director – GOV.UK (www.gov.uk) provides greater detail on the following:

  • Eligibility
  • How to apply
  • What to do if the claim is rejected

What is not covered off though is, if money is owed by directors to the company when it enters into an insolvency event, the Redundancy Payments Service will not make any payments to directors even if claims pass all the eligibility criteria. Therefore, it appears to be prudent to give some consideration in repaying these sums beforehand if possible, for the following reasons:

  • It may enhance the probability of a successful claim
  • Any appointed liquidator/administrator has a duty to recover the loan account in any event given it will be an asset.

If you have any queries regarding the above, please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit https://lnkd.in/ehKHz4K for further information.

Highest liquidations since 1960

That is the headline from the corporate insolvency statistics for the second quarter (1 April – 30 June 2023) that were published on 28 July by the Insolvency Service. 

In total there were 6,342 company insolvencies of which 93% were either creditors voluntary liquidations (5,240) or compulsory liquidations (637).  Collectively in the year (Q3 of 2022 to Q2 of 2023) the recorded number of creditor voluntary liquidations (“CVL”) is the highest since 1960, which is remarkable when you consider arguably our worst recession that peaked in 1993.  The latest figures mean the rate of liquidations is 52 in every 10,000 active companies registered as compared to 43.9/10,000 one year ago.

The remaining numbers reported were 409 administrations and only 56 company voluntary arrangements.  In addition to these numbers the two new rescue procedures introduced under the Corporate Insolvency & Governance Act have hardly been utilised.  From 26 June 2020 to 30 June 2023 there have only been 45 Moratoriums and 21 Restructuring Plans.

The big question must surely be why?  In short, the common features appear to be:

  1. The combination of Brexit, quickly followed by Covid-19 has had a severe impact on the world-wide economy.
  2. Cash flow has been adversely hit following the withdrawal of the Government’s fiscal and other measures put in place to support businesses during the pandemic, together with the legacy the financial support and the pandemic have left.
  3. Because of that support, companies that would ordinarily have ceased trading in 2020-21 were able to continue longer than envisaged.  This means the 2022-23 figures are swelled by the legacy of the higher than usual company survival rates during the pandemic.

Something that you will not see in Government dispatches is that many companies are using CVL as a vehicle for selling the business and assets, or even to “Phoenix” into a new company.  This is because of the much-contested decision to make HMRC a secondary preferential creditor, resulting in the restructuring procedures being no longer viable in many cases.  The low numbers of administrations, CVA, moratoriums and restructuring plans are indicative of this problem.

The saying, “Lies, damn lies and statistics” has some merit when considering the insolvency numbers because it is the devil in the detail beneath those core figures that matters and the signs are many businesses are finding themselves the subject of a merger or acquisition.

At PBC we are finding ourselves assisting companies and their professional advisors with going concern sales more often than in the past and we see no reason for that current trend to change in the short term.  However, more often than not, the key to an organised resolution is to seek advice at an early stage.  It is a long-standing piece adage but there can be no coincidence that most businesses are saved in one form or another where the directors sought advice early.

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) or 01908 488653 (Milton Keynes) or email to enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

Insolvency Practitioner Declares Further Dividends

kalkulation am rechner

The success of an insolvency process is often measured on the ability to realise sufficient assets in order to pay something back to creditors and two cases we are administering are meeting that goal.

In the first case, PBC are delighted to announce the payment of a further significant interim dividend of £200,000 to HM Revenue & Customs from an insolvency estate.  Combined with a payment of £500,000 in January, HMRC have now received over 35% of their debt.  With further assets to realise, it is expected that well over £1million will be returned to creditors.

The second case involves an individual who was declared bankrupt in 2019.  Realisations of two buy to let properties and an endowment policy have enabled payments of approximately 20 pence in the pound to be made to unsecured creditors.

Jamie Cochrane said, “It is always pleasing to be able to make payments to creditors as described here.  The commercial approach taken by PBC on these cases has increased the dividends we are able to pay”.

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 enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

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 enquiries@pbcbusinessrecovery.co.uk.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.