Hit by the collapse of ISG? We are here to help!

The collapse of ISG into Administration will have a significant effect of many in the supply chain with monies owed not being paid any time soon or potentially not at all. 

If the loss of income is likely to mean financial difficulties going forward it is imperative to take advice and try not to panic.

Whilst undoubtedly the Administrators of ISG have a strategy in mind, it is likely to be a few months before the anticipated financial outcome will become public knowledge. All we know so far is some 2,200 employees were made redundant, with 200 employees retained to assist the Administrators.

Below is guidance to supply chain members until the financial outcome of the matter becomes more visible.

  • If you are struggling to pay your suppliers, communicate with them early, explaining the position. This should also include HMRC. We would expect they will be under some form of guidance to help as best as possible in this particular matter. 
  • If you are asked to complete work for the Administrator, look to leverage your position in this scenario. Payment up front or even better payment of part of all your old debt to continue working. Understand your importance to the Administrator if this request is made. 
  • Retention of Title Clauses – For companies that have supplied goods, look at your retention of title clauses. This may enable you to recover your products.
  • Trade Credit Insurance – if you have this make a claim immediately.
  • Take advice from your accountant/solicitors or even an Insolvency Practitioner to see what options are available.

At PBC Business Recovery & Insolvency we advise companies daily and,  first and foremost, aways look at recovery options for those we advise – trying to prevent them entering a similar process to that of ISG.  Sometimes, this is unavoidable, but the sooner advice is sought the greater the opportunities are.

If you need any advice or assistance on any corporate recovery option or insolvency-related issue, then please contact PBC Business Recovery & Insolvency on 01604 212150 (Northampton), 01908 033150 (Milton Keynes), 01234 989150 (Bedford) or email to enquiries@pbcbusinessrecovery.co.uk. Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.

From the other side of the insolvency fence.

PBC business card in holder

So, your company went into liquidation and subsequently you receive a letter from solicitors acting for the liquidator, demanding you pay a sum of money in respect of various allegations of unfitness.  What do you do?

Well, the first thing you should do is consult with a solicitor that practices insolvency as they will be aware of the terminology and implications relied upon with insolvency litigation.

However, there has been an increasing demand upon insolvency practitioners (“IP”) to represent those confronted with insolvency-related claims.  Sometimes, assisting the instructed solicitor, while others have approached them directly.

At PBC we have (what is thought to be) a unique service, whereby we have the only person who is both an appointment taking IP while also an accredited mediator.  That, together with the Team at PBC having a wide and extensive range of experience, allows PBC to offer pragmatic and commercial solutions.

Two recent examples of where PBC have assisted have been:

Case 1.  A liquidator was pursuing the director for over £100,000 (although were willing to settle at £85,000).  Using our experience and knowledge, this claim has been extinguished.

Case 2.  PBC’s client was facing bankruptcy for a claim in excess of £200,000.  During negotiation, PBC put forward the realities of bankruptcy and, more importantly, the potential recovery the claimant may achieve.  Ultimately, a £75,000 settlement was agreed, resulting in the client retaining sufficient money to move on with their life.

It should be said, nobody at PBC has a right of audience to represent parties in court and solicitors are an invaluable aid in resolving disputes.  However, as PBC are demonstrating time and again, adding our practical experience and a reality check, often promotes settlement.

If you need any advice or assistance on any corporate restructuring or insolvency-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.

HMRC – Preferential financial recovery in insolvencies, but at what cost….

Analysis has found that HMRC has received an extra £14.4 million in tax owing from insolvencies since it regained its ‘preferential creditor’ status in December 2000.

The preferred status enables HMRC to be paid from a formal insolvency process ahead of unsecured creditors, which is effectively the general body of suppliers to that business. Given the forbearance from HMRC during Covid, the level of HMRC debt we often see with insolvency matters is significant, meaning asset realisations will need to be significantly greater to enable a return to the general body of suppliers.

In many instances, there will be no financial return at the bottom end and the best suppliers can hope for, if they don’t have bad debt insurance, is VAT bad debt relief on the sum not payable.

In our opinion, the preferential position HMRC find themselves in has the following consequences:

  • Some banks reducing the amounts they can lend to business and increasing the interest rates they offer on business loans.
  • Banks looking to mitigate exposure by way of invoicing discounting facilities, fixing their debt against the sales ledger. This is more costly than “normal” bank lending products, squeezing margins and reducing HMRC gain from corporation tax recoveries going forward from a viable business.  
  • Banks even more so, looking for personal guarantees from directors for business borrowings because if the ship goes down, they want a life raft to jump on to.  

In the overall scheme of things, the sum received through preferential status since December 2000 is not substantial for HMRC and we have no doubt that these funds would be far better off in the pockets of unsecured creditors as a whole. Indeed, it would be more beneficial if HMRC’s preferential status was abolished altogether, as it was in 2003, which, in turn, will allow greater lending opportunities for companies to recover, potentially avoiding a formal insolvency process while also increasing future tax receipts.

If you need any advice or assistance on any insolvency-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.

Will I be banned from acting as a director?

It would be wrong to imply HMRC simply agree to TTP upon application. PBC Business recovery and insolvency practitioner

A common question we, at PBC, are asked by directors who are facing the tough decision of closing down their business.

It is understandable when the media report profile disqualifications, such as ex-England and Liverpool midfielder, John Barnes, being disqualified for 3 ½ years from April 2024.  However, dig into that story and you hear that his company went into liquidation owing HMRC £190,000 following a complete failure of addressing the tax affairs.

In order to answer the headline question, we must first look at some context.  In the 14 years ending with the Insolvency Services report for 2022/23 there have been in total 16,440 director disqualifications – an average of 1,174 disqualifications each year.  Over the past ten years, available records show the average number of corporate insolvencies stands at 16,724 per annum.

The above statistics may provide a degree of comfort, but if you end up being one of those disqualified, that is no consolation.  So, what must you avoid to ensure you do not join the likes of John Barnes?

The Insolvency Services have two primary duties to consider before deciding whether a director ought to face disqualification proceedings, namely

  1. Is it in the public interest?
  2. Does the conduct of a director merit allegations of being unfit?

Unfit conduct’ includes:

  • allowing a company to continue trading when it can’t pay its debts
  • not keeping proper company accounting records
  • not sending accounts and returns to Companies House
  • not paying tax owed by the company
  • using company money or assets for personal benefit

The reported numbers for 2022/23 amounted to 932, of which 812 were directors giving disqualification undertakings and only 120 being court orders.  Some of the headline figures are:

  • 185 treated HMRC unfairly (as opposed to other creditors).
  • 147 – Accounting matters.
  • 41 – transactions to the detriment of creditors (e.g. selling/transferring assets).
  • 459 – COVID-19 financial support abuse (primarily, inappropriate bounce back loan applications or the use of the funds when received).

A director (or the board of directors) should never be shy in taking advice, whether that is from the company accountant or solicitor.  Alternatively, if directors believe their company is insolvent, or likely to become insolvent, they should be consulting with an insolvency practitioner who can advise, based upon both current issues and experience.  In short, directors should never to assume but seek advice early.

If you need any advice or assistance on any corporate restructuring or insolvency-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.

Unlicensed Insolvency Practitioners – wound up!

A week or so ago, we posted about being careful taking advice from unlicenced insolvency advisors. As they say, timing is everything, and on 15 July, The Insolvency Service published details of such an advisor being wound up by the court in the public interest.

https://www.gov.uk/government/news/court-winds-up-manchester-firm-offering-unlicensed-insolvency-practitioner-services

At PBC, we are aware some directors fear approaching an insolvency practitioner as they hear stories of the ramifications a director faces.  To the contrary, an insolvency practitioner will advise you of your options, duties, and will discuss potential issues with you.  Those who chance engaging an unlicensed advisor merely promote the likelihood of allegations of a breach of duty where personal liability for any loss suffered may arise.

If you need any advice or assistance on any corporate restructuring or insolvency-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.

Thank you PBC!

Whilst we advise, and are formally appointed over companies that are insolvent, we also undertake a significant number of formal appointments of solvent liquidations, known as Members’ Voluntary Liquidations (“MVL”). Below is a quote received from directors on a MVL we dealt with showing their appreciation.

“May I also take this opportunity to express our gratitude to Ian who has been very helpful and put our minds at ease during the period. Greatly appreciate the wonderful and helpful PBC team. Also, it goes without saying that Grace has also been most helpful and very proficient”

MVL is a process for solvent companies, enabling shareholders to wind-up the company’s affairs and receive cash or assets in the company after all debts have been paid.  This provides the shareholders with a more tax efficient way than just receiving dividends over an extended period.

If you need any advice or assistance on any MVL,  corporate restructuring or insolvency-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.

#solvent #mvl #northampton #milton keynes

Following Insolvency, is a director an employee?

An employee of a business in liquidation will have various entitlements that can be claimed against the Redundancy Payments Service (“RPS”).  Those entitlements fall under the Employment Rights Act.

In the past the RPS have sought to reject claims made by the directors.  At first, RPS claimed directors were making themselves voluntarily redundant.  This approach was quashed by the Court of Appeal who said meeting their statutory duties prevailed and redundancy was a direct result of meeting those duties.

The other argument has been a director is not an employee of the company, but an officer who is not entitled to claim employment rights.  The RPS place the burden of proof that a director is also an employee, firmly on the director.  Indeed, the RPS send directors a very challenging questionnaire that critics say is designed to draw the conclusion a director is not an employee.

However, there has been a glimmer of hope for directors following a recent Employment Tribunal case   This case arose following the RPS rejecting their claims, saying neither of the claimant directors were employees.  The case was heard on 15 April 2024 where the judge cited the factors, taken together, that demonstrated the claimant directors were employees included:

  1. They attended work for the duration of the operating hours each day.
  2. There was a clear distinction between their roles as an employee and their role as a director.
  3. They worked for set hours between 20 and 25 hours per week.
  4. They were paid a regular salary which was subject to the PAYE scheme.
  5. Pay slips and P60 tax documents were issued.
  6. They conducted themselves in the same way as other employees when absent and when booking leave.
  7. There is no evidence that they could substitute another for the role of an employee.
  8. There is no evidence that they used company money as personal money.
  9. They were accountable to each other and the accountant.
  10. They did not work anywhere else.

Both directors were awarded statutory redundancy and pay in lieu of notice.

Nobody plans for their company to fail.  However, directors should ensure they have a binding contract of employment in place that is up to date and commensurate to the employment role they carry out.  Together with the above points, this will help to reduce the chances of the RPS being able to reject a claim for payment of your employment entitlements.

If you need any advice or assistance on any corporate restructuring or insolvency-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.

Abusing a Winding up Petition

Woman sitting at desk with PBC logo on the screen

As everyone in business will appreciate, the phrase, “cash is king,” rings very loud when it comes to keeping your business going.  With many businesses across the UK fighting to get debts paid, it has resulted in recovery threats increasing. But just how far can you press a customer for payment?

In one case PBC were instructed to advise directors of a company that was literally days away from crashing into administration, following a threat of, “if you do not pay our client by 4.00 p.m. Friday we shall commence winding up proceedings.”  After some checking it turned out the client supplier had refused to supply the goods until they were paid for in advance.  After we pointed out the goods had not even left their client’s building, the threatening solicitor withdrew their threat.

A malicious winding up petition is one that has been presented wrongly.  It maybe the petitioner knows the debt is not due or payable, or it is disputed, where a more appropriate judicial process ought to be followed.  In short, it is designed to pressurise a payment that may not lawfully be due and this is regarded by the courts as an abuse of process.

Another action that is considered an abuse is when the petitioner advertises outside the parameters of the insolvency rules.  For example, emailing a copy of the endorsed petition to the respondent company’s bankers on the day the petition was presented can result in the petition being dismissed and, potentially a subsequent legal action against the petitioner on grounds of malicious prosecution.

There are two key messages, here, namely:

  1. As the creditor, you need to consider whether you have an enforceable debt and, if so, what is the most appropriate route for collection.  It also helps if you can put the emotion to one side and consider the outcome of your actions and whether there are better alternatives that will maximise recovery.  If in doubt, seek legal advice or, where an alternative insolvency procedure has been put forward by the debtor, consult with an insolvency practitioner for their views on that alternative.
  • For the debtor, at the first sign of experiencing difficulty in meeting your debts when they fall due, take advice from an insolvency practitioner.  Do not leave it until you have frustrated your creditors so much that they become focussed on seeing your business wound up and you investigated for potential misconduct.

It is all too simple to tell someone who is owed money not to become emotional, but threatening winding up when that is inappropriate or even malicious can come back and haunt you.  Yes, there is a desire to recover debts as quickly as possible, but beware of not falling into the malicious trap.

If you need any advice or assistance on any corporate restructuring or insolvency-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.

Insolvency – avoid being a statistic.

As a business owner, put your hand up if you enjoy doing the administrative bits, the paperwork, the analysis of trade performance etc.  We wonder how many of those reading this now have a raised hand.  Very few, we wager.

The fact is, very few of us like the operational demands of running a business and would much prefer to just be doing the business.  Unfortunately, many with that mindset end up calling PBC.

Recent figures indicate the number of businesses under significant financial distress rose by almost 31% to over 554,500.  Add to this the 40,000 businesses (a 20% increase) described as being under critical financial distress and these numbers make uncomfortable statistics.

Okay, if you analyse the above statistics in greater detail, you will see much of the corporate failure reported is down to economic trends, unforeseen or unavoidable circumstances, such as the COVID pandemic or the failure of a major customer drags you down as a casualty of its demise.  However, while there are many reasons for a company to fall into financial difficulties, one common theme, is a lack of real time financial awareness, that can result in a business failing. 

Doing the business should come naturally as you are providing what your skillset offers.  However, comments such as, “My bookkeeper produces monthly management accounts, but I do not understand them so stick them in a draw for my accountant,” is not uncommon.

Some of the core areas of focus:

  • If you do not like paperwork then engage a bookkeeper (preferably one that comes on recommendation of your accountant).
  • Understand your trading accounts.  That is either learn the accounting basics or, in the alternative, let your accountant explain them in simple terms.  Ask questions as it is essential you understand.
  • Keep on top of your cash flow projections.  These can show how the business is performing, help you plan strategy for going forward and identify early on where there is room for improvement or future bumps in the road.
  • Be aware of the trends impacting on your industry.  This may assist in the way you operate and can influence other areas, such as pricing.
  • NEVER bury your head in the sand and hope negative issues will go away.  Invariably, when problems intensify, without meeting them head on enhances the chance you will become one of these statistics.

Should the feedback you are receiving from your advisors be of a negative nature then seek professional advice without delay.  It is not a coincidence, where advice is sought early, the more positive outcomes prevail.

If you need any advice or assistance on any corporate restructuring or insolvency-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.

Insolvency and mental wellbeing.

Insolvency can significantly impact upon the mental health of individuals as a result of the stress, anxiety and uncertainty that is associated with financial difficulties.  Where someone is already suffering from mental welfare, financial difficulties may also exacerbate those existing mental health issues.

At PBC, we are acutely aware, that potential insolvency, at times,  can bring feelings of shame, guilt, and failure.  It is human nature to feel that way irrespective of the underlying reasons behind their difficulties.  It is, therefore, vitally important for those having insolvency issues that they seek support from financial advisors and insolvency practitioners at the earliest practicable date as this may ease those negative and damaging thoughts.

From PBC’s perspective, when providing advice, there is no judgement.  We are very likely to have seen worse financial positions and have no greater respect than those that make contact to seek advice, either by phone or attending our Northampton or Milton Keynes Offices for a meeting. All initial meetings are completely free of charge, without obligation and we promise those we advise they will be more informed as to their options (don’t rely on google!).

Reaching out early for advice is crucial in managing both the practical and emotional aspects of insolvency and it is even more important to prioritise self-care, remembering that there are resources and people available to support you through difficult times.

Should you or anyone you know/advise require any 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.  Alternatively, visit www.pbcbusinessrecovery.co.uk for further information.