An important one for us is the publication of insolvency statistics.
In the swell of regular announcements and opinion columns, the actual numbers and facts help us determine exactly what’s going on with the economy as far as we can and why.
The Insolvency Service decided that they’d publish company insolvency data on a monthly basis alongside their regular quarterly bulletins so while it might seem like there’s an avalanche of analysis - it’s important and useful.
2020 hasn’t so much been a rollercoaster ride for company insolvencies as a log flume - only going downhill and fast.
The overall number of company insolvencies from July to September was 2,672 - which was down 9% on the previous quarter and down 39% on the same period of 2019.
When compared to Q3 2019, all types of company insolvencies have fallen although this is mainly due to the fall in Company Voluntary Liquidations (CVLs) which is by far the most common type of company insolvency accounting for 72% of all cases.
In addition to CVLs falling, compulsory liquidations were down by 58%, CVAs by 29% and administrations by 18%.
It’s hard to make concrete assumptions but the most likely explanation for these falls is the financial support available to companies during the pandemic which became available in March coupled with a suspension of statutory demands and winding-up petitions from late April until the end of 2020 under the Corporate Insolvency and Governance Act.
The picture is more complicated when looking at the previous quarter of this year.
Overall company insolvencies have fallen and CVLs are down 17% but compulsory liquidations rose by 42% and CVAs by 34% - although as the numbers are relatively small, any rise in the number of cases would have a dramatic impact on percentages.
For example, there were 63 CVAs in Q3 2020 which itself is one of the lowest levels ever recorded but they are higher than the previous quarter total of 47 which itself was the lowest quarterly total since Q3 1993.
A compulsory liquidation can only take place following a winding-up order obtained through the court by a creditor, shareholder or director. HM Courts & Tribunals service has been running a vastly reduced service since March so this number has fallen greatly as a result.
Just over half of the compulsory liquidations carried out in Q3 2020 had a petition date in Q1. The Insolvency Service estimated that the recent increase in cases was due to petitions being resumed prior to the first national lockdown.
Administrations rose slightly in this quarter to 396 from 389 in the previous one and there was one administration - exactly the same number as Q2 2020 and Q3 2019.
Additionally two companies obtained an insolvency moratorium and one company had a restructuring plan sanctioned by the court. Both of these new procedures were created under the Corporate Insolvency and Governance Act and the use of moratoriums is expected to increase in future reporting periods as more businesses take advantage of them.
When it came to the individual sectors of the economy, all saw a decline in insolvency rates in the 12 months ending in Q3 2020.
The areas that saw the most insolvencies in the 12-month period were construction (2,381); wholesale and retail trade (1,924) and accommodation and food services (1,797)
Although the effect on the hospitality industry of a second lockdown in their traditionally busiest period will be something to watch for in the next round of statistics.
Companies House also released some pertinent statistics last week - the incorporated companies numbers for Q3 2020 which provide a snapshot of the number of active companies in the UK in the past three months.
Like the suspension of winding-up petitions, there was a pause in the voluntary and compulsory strike-off process in April in order to give Covid-19 affected businesses sufficient time to update their records to avoid being struck off the register.
Voluntary strike-offs were resumed early in September so companies that applied to be struck-off or dissolved before July were included in the numbers.
By the end of September, there were 4,663,639 companies on the register with 221,020 new incorporations last quarter compared to 102,269 dissolutions.
This is a 30.2% rise in incorporations on Q3 2019 and the largest Q3 annual increase since 2012 when records began while dissolutions fell by 21.2% annually.
These figures are in contrast to the final significant statistics release this week which came from the Office of National Statistics ongoing Business Impact of Covid-19 (BICS) survey.
This is a fortnightly business survey which measures businesses’ responses on turnover, trade and other measures in this period.
Their latest bulletin has the striking headline finding that two-thirds of all UK businesses are at “low to severe” risk of insolvency. The underlying evidence showed that 64% of respondents are at risk of insolvency with 43% running on less than six months’ cash reserves.
This is on top of 14% of all UK businesses pausing trading due to local lockdown restrictions.
They rate the hospitality industry as the most vulnerable with 17% of all accommodations and food companies as trading at severe risk while a further 7% of all pubs, restaurants and hotels having zero cash reserves to support them.
Chris Horner, Insolvency Director with Business Rescue Expert, said: “The figures are always interesting taken separately although because of the time lag they are a little inexact - telling us where we were rather than where we are right now.
“One thing we do know for certain is that the current circumstances depressing overall company insolvencies is changing.
"Winding-up petitions are still limited but, other types of enforcement action are coming back online for creditors to use and the suspension on wrongful trading liability has also recently expired.
“Following the unwelcome Halloween surprise of a new national lockdown a lot of businesses will be hoping that there’ll be more financial support forthcoming than a month’s extension to the Coronavirus Job Retention Scheme (CJRS) Furlough scheme.
“They might be disappointed and looking at a minimum of four weeks with no income through no fault of their own.
“One action they can definitely take right now is to take professional advice on what their options are. Early action can help them put measures in place that will help secure their business so it can be on a stronger footing when it’s allowed to reopen.”
Get in touch with us today to see what we can do to help you and your company right now.
We can arrange a free initial virtual consultation to better understand your company’s situation right now.
Together we can then work on a realistic recovery or rescue plan which will aim to give your business the best chance of making it through 2020 and beyond.
Even though the latest company insolvency figures are from September, it will be Halloween in a couple of weeks and one part of them reminds us of a popular horror movie trope.
The bit where a seemingly lifeless hand starts to twitch with faint movement before one or two of the fingers begin to recover feeling and move of their own accord.
There’s some movement within the figures that has been missing in previous months.
While nowhere near what the average figures for corporate insolvencies should be or have been at this stage of the year, it indicates that company insolvencies could finally begin their overdue and expected rise.
A total of 926 corporate insolvencies were recorded in September - a rise of 148 from last month although they’re still 39% down on the same period last year.
This number is made up of 742 Company Voluntary Liquidations (CVLs) (up from 586 last month); 44 Compulsory Liquidations (down from 66 last month); 109 administrations (down from 110 last month) and 31 Company Voluntary Administrations (CVAs) (up from 15 last month). There were no receiverships.
The biggest move percentage wise was from CVAs that were up more than 50% from the previous month and up 41% from September last year indicating that more companies are choosing this method to protect and restructure their businesses.
One thing to bear in mind however is that when dealing with a low number of cases even a small increase can lead to a distorted increase.
In other categories Company Insolvencies are down 39% from a year ago; compulsory liquidations are down 81%; administrations are down 31% and even though there were 156 more CVLs in September compared to August, they were still 32% down on the total from September 2019.
Another factor influencing the figures was the continuing temporary prohibitions on the use of statutory demands and certain winding-up petitions that began on April 27 were extended to 30th September under the terms of the Corporate Insolvency and Governance Act 2020.
They have subsequently been further extended to 31st December 2020 which will continue to depress the number of corporate insolvencies reported into next year.
The statistics also reported for the first time that two companies had successfully obtained an insolvency moratorium and another had a restructuring plan sanctioned by the court.
Both of these new procedures also came in with the new Corporate Insolvency Act.
The Insolvency Service said: “The low number of cases of each of these new legislative tools since the Act came into force is likely to be as a result of the range of Government support provided to companies including the range of temporary measures that have recently been extended.”
They are careful to avoid recording whether insolvencies are directly caused by the Covid-19 pandemic or subsequent public safety measures that have impacted business as they state it’s impossible to ascertain its direct effect on insolvency case numbers.
Chris Horner, Insolvency Director with Business Rescue Expert, said: “While overall corporate insolvency numbers are still down it’s interesting to see that CVA’s have doubled from their historically low base last month and CVLs have also increased.
“This is a recognition that despite the circumstances there’s some accessible and useful tools an insolvency practitioner can use to help rescue and restructure a business that can be viable under the right circumstances.
“2020 has been nothing like the right circumstances for a lot of otherwise good firms and through no fault of their own they’ve found themselves facing rising debts with either reduced or halted income.
“Government support has undoubtedly helped many of them keep their doors open but with an uncertain few months ahead, now is the time to start making alternative plans to survive before any more restrictive changes are announced and implemented within days.”
R3 President Colin Haig agrees. He said: “These results show that the toll the Covid-19 pandemic is taking on businesses and consumers may be starting to be felt in the official insolvency numbers.
“Despite the increases, today’s figures are still lower than pre-lockdown levels of insolvency and don’t fully reflect the health of businesses and the economy in the way they would normally.
“The situation remains worrying. The economy is still 9% below pre-pandemic levels, despite growth of 2.1% in August, which shows it has failed to fully recover from the significant contraction in April. We’ve also seen more big brands enter formal insolvency processes, or consider restructuring options, as the delay in returning to pre-pandemic conditions inevitably hampers trading.
“It’s likely that directors of businesses that would have remained profitable had COVID not happened and will see signs their businesses are struggling for the first time ever. We’d urge them to seek advice as soon as these signs appear. The earlier you seek advice, the greater the number of options you have to turn the situation around.”
Get in touch with us now to see what we can do to help you and your company right now.
The sooner you arrange your free initial virtual consultation, the sooner we can start working on a plan to secure your business and give it the best chance of recovery when conditions eventually become favourable again.
Yes, the winter Job Support Scheme is waiting in the wings but it’s not going to save every job or company.
Some will decide to battle on throughout the winter regardless of the likelihood of success. Others will make hard decisions now in order to try and ward off the worst of the financial storm while some may decide that this is one crisis they are not equipped for and will make arrangements now to begin to close their companies in an orderly fashion.
We look at the fallers among this month’s runners and riders so far and all the other administration and insolvency stories you might have missed this October.
Pizza Hut CVA
Pizza Hut is the latest big-name to instigate a Company Voluntary Arrangement (CVA) with its creditors to protect its long term future in a fluid food environment.
Yum! Brands, who own the UK franchise along with KFC and Taco Bell, have agreed that as part of the deal they would close 29 sites immediately with the loss of 450 jobs.
This still leaves Pizza Hut with 215 locations and over 5000 jobs still in place.
A spokesperson said: “We are delighted to have reached such a constructive position in partnership with our landlords and creditors. We appreciate the support of everyone involved and this outcome provides us with a strong platform to secure the long-term future of the business.”
Pizza Hut joins Pizza Express, Ask Italian, Zizzi, Carluccio’s, Bella Italia, Cafe Rouge and Las Iguanas in seeking the protection from creditors actions and breathing space offered by a CVA.
The largest Cinema operator in the UK has announced that it’s temporarily closing all of its 127 UK sites as well as its 536 US based ones.
Mooky Greidinger, Cineworld chief executive, said: “This is not a decision we made lightly, and we did everything in our power to support safe and sustainable reopenings in all of our markets - including meeting, and often exceeding, local health and safety guidelines in our theatres and working constructively with regulators and industry bodies to restore public confidence in our industry.
“Cineworld will continue to monitor the situation closely and will communicate any future plans to resume operations in these markets at the appropriate time, when key markets have more concrete guidance on their reopening status and, in turn, studios are able to bring their pipeline of major releases back to the big screen.”
Along with hospitality, the entertainment industry is suffering from the double hits of no big names to lure them through the doors and the new infection spikes indicating that the virus spreads more quickly indoors.
With 51% of entertainment, recreation and arts industry workers still on furlough, the forthcoming job support scheme will be of little benefit to the workers losing their positions as they are not able to remain employed in any capacity - part-time or full-time.
Administration for Polpo
The small-plate specialists will close their chic Venetian-inspired restaurants in Chelsea and Soho after being unable to return to profitability following a CVA last year.
The group celebrated its tenth anniversary in 2019 and closed three more branches in London and Brighton to concentrate on its core locations but sadly Covid-19 restrictions have choked off any hope of recovery for the group.
One of the best known English Language colleges in the country has appointed liquidators as Coronavirus restrictions meant that it was impossible for MLS International to continue trading.
The Bournemouth-based campus welcomed around 2,000 pupils a year from 40 countries at its peak but the enforced closure of educational institutions in March along with uncertainty around the legality of being able to provide certain specialist training online meant that they ceased to generate any revenue since April.
The travel restrictions from various countries proved to be the final, insurmountable obstacle as a large proportion of their students would come from the aviation industry.
A spokesperson said: “It’s sad to see a company like MLS fail as it’s a college that has long-established training traditions and is well known in Bournemouth, it’s hometown, abroad and in the industry.
“The pandemic has severely impacted this business which has until this year been profitable. Unfortunately, the reduction in international air travel, uncertainty as to its return and no guarantee that overseas students would want to travel to the UK to learn English in sufficient numbers for the business to be profitable, the directors had to make the difficult decision to cease trading and enter liquidation to prevent the position worsening for creditors.”
Upmarket Italian eatery Gusto Italian has entered a CVA to secure its immediate future.
Its landlords and other creditors agreed a deal to keep the majority of its sites open but four will close along with 105 jobs that could not be redeployed to other locations.
Chief Executive Matt Snell said: “The last six months have been the most challenging in the history of our business and the wider sector. The passing of the CVA is an important milestone, securing the future of the Gusto business and protecting more than 600 jobs.”
The famous company that secured the offer of millions of pounds from the Department of Transport despite not having any ships in its fleet has entered voluntary liquidation.
Seabourne Freight owes creditors including HMRC over £2 million but only had £39,120 in assets to repay them.
The company was awarded a £13.8 million contract in 2019 to ship food and medicine between Ramsgate and Ostend in Belgium to relieve Dover’s port in case of a no-deal Brexit but this was later rescinded when it was revealed that Seabourne didn’t have any fleet to make the sailings.
With a quarter of the country under various local lockdowns with no sign of respite and a new traffic-light system due to be unveiled with even harsher restrictions attached, 2020 is still going out of its way to beat everybody into submission.
Every time it looks like there’s some good economic news, three pieces of bad news come along to pile on top of it. Spring 2021 might be five months away but it sometimes feels like five years.
If it’s hard to make forecasts for the immediate future now - how can we accurately predict what’s going to happen beyond the rest of the year with any certainty?
One thing we can say with a degree of certainty is that our expert advisors are always available to speak to you once you get in touch with us.
They’ll arrange your free virtual initial consultation whenever you want to help you focus on your immediate challenges and what you can do to meet and beat them.
We can help you set out an action plan to tackle your longer term issues too but the most important thing to do is to make the decision early to speak to a Business Rescue Expert and see what they’ve got to say.
It’s just not cricket for Levy UK
The world’s largest outdoor catering company, Levy UK, is releasing all casual staff as it expects that crowds will not return to English sporting venues until 2021.
The company, which caters for among others Tottenham Hotspur, Aston Villa, the O2 Arena, Edgbaston and the Oval cricket grounds as well as numerous other concerts and events, emailed staff this week.
A spokesperson said: “The sports and leisure sector has been one of the most deeply impacted sectors as a result of the Covid-19 pandemic.
“We’ve reviewed the likelihood of a return of sporting events, exhibitions and conferences on a site-by-site basis. With no catered sports or events taking place, or scheduled to do so for the foreseeable future, it’s with deep regret that we have had to take the difficult decision to remove some of our casual workers from the furlough scheme.”
The company said it hoped to repurpose as many permanent staff with other positions in the group as possible.
Skiing business heads downhill
Ski Weekends, run by Harris Holidays, the Uk’s leading ski tour operator for over 30 years has gone into administration.
The company operated from 17 UK airports to resorts all over Europe and served around 6,000 customers every season.
Managing Director Dan Fox lamented the failure of government schemes and support. He said the business was in a good position for sale or additional financial support but backers withdrew when new Spanish quarantine regulations came into force in July.
Fox said: “Most of the European countries have offered practical help and hard cash to support their tourist industries and companies. Not so the UK government.”
Foreign currency exchange finally folds
Travelex, the UK’s largest foreign currency exchange went into administration this month and although parts of the firm had been bought by a newly created company controlled by creditors in a pre-pack deal, more than 1,300 jobs have been lost.
The year started badly for Travelex when its systems were hacked in a cyber attack in January and haven’t improved once the scale of the coronavirus pandemic became apparent.
None of the businesses UK retail or airport branches will reopen after the sale.
DW Sports looking for extra time
It’s been a bad year for businesses formerly owned by Dave Whelan. The ex-footballer turned entrepreneur saw DW Sports become one of the UK’s highest profile leisure outlets while his football team, Wigan Athletic, reached the Premier League and famously won the FA Cup Final in 2013.
Sadly Wigan Athletic were docked 12 points for going into administration this year which ultimately saw them relegated to League One and now DW Sports have followed them into administration themselves.
The company plans to protect as many of its Fitness First gyms as possible but all 50 retail sites will close for good and its website will cease trading with immediate effect.
Chief Executive Martin Long said: “Having exhausted all other available options for the business, we firmly believe that this process can be a platform to restructure the business and preserve many of our gyms for our members and also protect the maximum number of jobs possible for our team members.”
Historic race track goes to the dogs
Belle Vue Greyhound track in Manchester, the UK’s first purpose built facility when it opened in 1926 has permanently closed its doors for the final time.
Owners Arena Racing Company said: “There’s no longer a business case to support the ongoing operation of the stadium and the national coronavirus lockdown has had a particularly negative effect on Belle Vue with racing behind closed doors simply unable to sustain the business.”
They confirmed that all staff at the venue, which also hosts stock car racing, would be made redundant as a result.
Redundancy comes to UK’s Covid-19 ground zero
20 staff at the Staycity hotel in York, which had the first confirmed Covid-19 cases in the UK, are being made redundant.
The company emailed staff telling them that “the company is set to make significant losses during 2021/2022 therefore cannot sustain the number of employees currently employed.”
The hotel is currently occupied by homeless people which the council are paying for but have seen hopes of reopening dashed as the coronavirus pandemic and lockdown continue, decimating the city’s busiest tourist period.
Many businesses and directors will be hoping that August 2020 will be as bad as the economic news gets.
It might be - or it might be just another month of bad news leading into another.
September sees the government’s Covid-19 support packages continuing to be wound down as employers will now have to contribute 10% of their furloughed staff’s salaries.
One thing that won’t alter is our commitment and availability to businesses that want or need some professional, independent advice on how they can maximise their own survival chances.
Get in touch with us to arrange a free virtual consultation whenever you want.
We can help you create a plan that will bring some certainty and structure in a year without any.
The report warned that there could be a lot of businesses that would see a cash flow and lending crisis arising from “companies that were highly leveraged, had a low credit rating or were unprofitable before the Covid-19 shock” being unable to access sufficient funding.
The report continued: “While the number of corporate insolvencies has remained low to date, insolvencies are likely to increase. Some companies were vulnerable at the outset of the pandemic, and may become insolvent as a result of the shock.
“Others may face challenges to their long-term viability given structural change in the economy, some of which may have been accelerated or precipitated by the pandemic.”
The bank held interest rates at their record low level of 0.1% but Bailey was more concerned with forthcoming unemployment and business failure rises.
He said it was important policy makers helped workers “move forward” and not keep them in unproductive jobs. He reiterated that coronavirus would inevitably mean that some jobs were made redundant and it was right to focus on helping people to find new jobs.
“(CJRS) has been a very successful scheme, but the Chancellor is right to say we have to look forward. I don’t think we should be locking the economy down in a state that it pre-existed in.”
While he thought the recent recovery was better than most had expected he cautioned: “We don’t think the recent past is necessarily a good guide to the immediate future.”
The Bank still expected the UK economy to shrink by 9.5% this year which while would be better than the initial assessment of a 14% contraction, would still be the sharpest recession on record and the biggest annual decline in over a century.
Despite forecasting that the economy would recover to its pre Covid-19 size by the end of 2021, unemployment was expected to almost double from the current rate of 3.9% to 7.5% by the end of the year as the various coronavirus business support schemes wind down.
Average earnings are also expected to shrink with many workers facing a pay cut or freeze this year with bonuses also reduced.
Interestingly, he noted that the forecasts are based on the assumptions that there was no second wave of Covid-19 and that there was a smooth transition to a new EU Free Trade agreement at the start of 2021 - both would be considered optimistic assessments.
Economic reports and forecasts are meant to be dry and dull documents.
When they’re dramatic then the news doesn’t tend to be good and the overwhelming mood from the latest one is still “we don’t think things are as bad as we thought they might be” as opposed to “everything’s ok”.
We keep a close eye on the current insolvency statistics and while liquidations and administrations are low, they are deceptively so.
The time to prepare and protect your home from a storm is before it arrives, not during one - and it’s the same with your company.
The economy has taken a nosedive and it might get even worse before it starts to get better so now would be the perfect time to make sure your business is as robust as it can be to withstand an uncertain second half to 2020.
Get in touch with us today and we’ll arrange a free, virtual initial consultation at your convenience.
You can outline what issues your company has to one of our experienced, expert advisors and they can work with you on a plan to address these and strengthen your business in other areas so it has the best chance of withstanding the chill financial winds when they start to blow in earnest.
Because these aren’t normal economic circumstances however, they need some large asterisks next to them.
The overall number of company insolvencies was down 23% based on the first quarter of the year and down a third (33%) on the same period last year.
There were a total of 2,974 company insolvencies in England and Wales for the quarter - down from 3,848 from Q1 2020 and 4,425 from Q2 2019.
There were 195 compulsory liquidations (down from 707 in Q1); 2,346 creditor voluntary liquidations (CVLs - down from 2,673); 386 administrations (down from 398); 47 company voluntary arrangements (CVAs - down from 47) and one receivership which is at the same level.
Creditors Voluntary Liquidations form the vast majority of company insolvencies making up 79% of all cases. These were down 12% on the previous quarter and down 24% from the same period a year ago.
Compulsory liquidations saw the largest percentage decrease of all categories with a reduction of 72% on the last quarter and 76% from Q2 2019. Company voluntary arrangements were down 32% from Q1 and nearly half from 12 months previously while administrations saw a slight reduction of 3% from Jan to Mar this year and a 10% decline from Q2 2019.
Now clearly the effects of the coronavirus pandemic and subsequent lockdown are working their way through the system but this can’t solely explain the precipitous drop off in activity.
There are four main factors at work that are reducing the expected rate of company insolvencies:
The Insolvency Service have also been at pains to point out that they are not recording whether an insolvency is directly related to the pandemic so cannot state with any certainty its direct effect on insolvency volumes.
In the coming weeks and months this grey area will become highly scrutinised as statisticians and policy makers look to find evidence and justification for existing and future policies.
While every industry saw a reduction in the number of redundancies in their sectors, construction still had the highest number with 2,778 insolvencies. Wholesale & Retail Trade saw 2,177 while Accommodation & Food Service - comprising the hospitality and restaurant industries - had 2,026.
Additionally 176,115 new company incorporations were recorded in the UK which is an increase of 3.7% on the previous quarter.
There were only 14,606 dissolutions recorded in Q2 which is a huge fall of 89% on the previous three months. This was accredited to the easing measures listed previously.
While the unexpected good news is as welcome as August sunshine, it will also inevitably give way to chillier Autumn weather and probably chillier still insolvency numbers.
Your business is not a number - it’s made up of hard-working people that you might have employed for years and you’ll do everything you can to keep them and your company together.
Get in touch with us now while you’ve got some time and we can work with you to see what options you’ve got to make sure your business makes it through the rest of 2020 and beyond in the best possible shape.
A free initial, virtual consultation could be the ideal place to talk through your ideas, outline your concerns and begin to reshape your business for the change economic environment it will inevitably find itself in.
T M Lewin, Cafe Rouge, Bella Italia, Harveys Furniture, Intu and Wigan Athletic have all contacted insolvency professionals recently to act as administrators and look to save or sell parts of their businesses so they can survive.
We’ve been doing our level best to keep you up-to-date with all the latest developments but by writing about so many we’ve discovered a recurring but potentially misleading theme that we’d like to correct.
The number of articles and stories we’ve seen that imply that administration is a terminal end of life event for a business is staggering.
It’s also not true.
Yes, administration is an insolvency event and could eventually lead to a company going into liquidation and it’s assets being sold off to repay creditors depending on the individual circumstances of the business, but it can also prove to be a shrewd step.
It can buy valuable time for a business to restructure its debts and financial affairs and offer the company and creditors a fair and equitable way forward for both of them.
It protects a business from aggressive creditor demands and legal actions such as statutory demands and winding-up petitions.*
*Under the Corporate Insolvency and Governance Bill 2020, these and other measures are suspended until at least September 30th 2020. Once this suspension is lifted, then an administration will further prevent creditors from using them.
An insolvency or liquidation would mean that a creditor would probably be looking at taking a loss on their investment but an administration would give them a chance to recoup more or at least break even.
Chris Horner, Insolvency Director with Business Rescue Expert said: “Administration is one of those procedures that sounds daunting and even a little scary at first but the more you learn and find out about it and its advantages, the more appealing it becomes.
“No two administrations are the same. Our experienced team will answer any questions you have about the process and will take into account the unique circumstance a business faces and how best to address them.”
Get in touch with us today and we can book your free initial consultation - you can give us an idea about what issues your business has to overcome and we can help plan a way to meet and beat them.
Cafe Rouge/Bella Italia
The Casual Dining Group, which owns such well known restaurants as Cafe Rouge, Bella Italia and Las Iguanas, has gone into administration.
91 outlets will immediately close with 1,900 positions going with this decision.
Chief Executive James Spragg said: “We’re acutely aware of our duty to all employees and recognise that this is an incredibly difficult time for them.
“Working alongside the administrators, we’ll do everything we can to support them through this process, with a view to preserving as much employment as we’re able to.”
One of Yorkshire’s best known homewares and gifts retailers - Peter Jones - has gone into administration with the loss of 70 positions and 10 stores in various locations.
A spokesperson for the administrator said: “Lockdown was a challenge too far for this retailer’s finances and in the unfortunate situation that it cannot continue to trade, we’re managing a sale of its stock, in order to seek a return to creditors, and managing the wind-down process.”
T M Lewin folds
Shirtmaker T M Lewin entered into administration and will see all of its 66 retail outlets close with a loss of 600 jobs across the UK.
The group’s owners, Stonebridge Private Equity, bought back the brand’s remaining assets including its online business in the pre-pack deal
Stonebridge said that in the current format T M Lewin was no longer a viable going concern.
They said: “The business is unable to sustain current rental agreements for its store network across the country.
“With all stores still remaining closed due to social distancing guidelines, our customers have been unable to shop in store for the past three plus months; this has forced our hands to focus on a radical overhaul of the business model, rebuilding from the ground up in a fashion we deem fit for the years to come.”
Soletrader closes stores and goes into CVL
Shoe retailer Sole Trader has entered into a Creditors’ Voluntary Liquidation and closed eight of its UK stores as a result. The remaining stores and the website hope to reopen to trade later this month.
The company said it was a necessary action and will place the brand “in a strong position for a future beyond Covid-19, as the retail industry comes to terms with the macroeconomic consequences of the current crisis.
Marcel Bordon, director of the company said: “For more than 50 years, Soletrader has been a fixture on the high street, at the forefront of premium footwear trends. During this time, we have faced challenges big and small and come through them by supporting each other and working together.
“But we have never experienced a challenge like the present Covid-19 pandemic, which forced us to close our network of UK stores during lockdown. The financial impact of the virus has further complicated some of the well-documented challenges that we, and the wider retail industry continue to face, such as the rise of the online shopping and the UK’s business rates system.
Russian Criminals and Brexit shatter Customade’s hopes for a good 2020
One of the UK’s best-known double glazing manufacturers has gone into administration causing two of their eleven factories in Halifax and Livingstone to close.
The group hopes to continue to trade in the future but pointed to a string of negative factors that caused the company into a pre-pack deal.
They said: “At the end of 2019, we were dealing with Brexit and there was a General Election, which impacted consumer confidence. To add to this, in December two of our biggest customers went bust.
“Then in January 2020 we suffered from a Russian ransomware attack. Following this we managed to get the business back up and running in February and we had a decent order book going forward. Then we went into lockdown and this hit the business once again.”
AllSaints rise again through CVA
The UK and US fashion retailer AllSaints entered a Company Voluntary Administration deal which was approved by its creditors late last week.
The move saw the majority of its 41 UK stores and 42 American-based stores move to a turnover based rental agreement.
Chief Executive Peter Wood said: “We’re delighted that the majority of our landlords across the UK and US voted in favour of our proposals, and would like to thank them for their patience and understanding.
“The decision to launch the CVAs was not taken lightly, and this successful outcome will be instrumental in helping us to ensure the long-term viability of AllSaints.”
There’s some confusion around what is and isn’t allowed in businesses and offices in the UK, which isn’t helping any Covid-19 recovery.
It’s going to take consumer confidence to regrow before we can begin to think about economic matters returning to normal again, which may be a while.
So you might as well use the time you have to to get your business ready for recovery in the weeks and months ahead.
Get in touch with us and we’ll help you focus on what you can do in the short and medium term to make your company leaner, stronger and better equipped to face whatever the rest of 2020 can throw at it.
We’ll arrange a free, initial virtual consultation with you to help identify what the priority areas of concern are and what you can do to make sure they’re dealt with by the time your doors are fully open.
As of June 25th 2020, the Corporate Insolvency & Governance Act 2020 received Royal Assent and became law - coming into effect immediately.
Whilst many of the measures are temporary such as the suspension of winding up petitions and wrongful trading provisions, one of the long term measures introduced by the act is the Insolvency Moratorium.
What is the Insolvency Moratorium?
The moratorium grants a business ‘breathing space’ from its creditors to allow a plan to be formed to restructure the company’s debts.
Initially a break of 20 business days is granted, however this can be extended by a further 20 business days by filing an extension with the court. Further extensions can be granted, but would require the consent of creditors.
In order to officially enter into a moratorium period, the board must appoint a licenced insolvency practitioner to act as the monitor of the company.
If you need to appoint a monitor, please contact us to discuss your situation directly with one of our insolvency practitioners.
During the moratorium, your company will be granted a payment holiday from all debts prior to the commencement of the process. This means you won’t be able to make payments against these debts without permission from the monitor. The moratorium also puts all legal proceedings and recovery actions on hold, including, but not limited to:-
The court can however grant permission for these to proceed in certain circumstances so it’s important to act quickly when a moratorium is granted. Employment tribunals will also usually continue in moratorium.
How to apply for a moratorium?
There are two potential routes to entering a moratorium, depending on the circumstances of the company.
Generally it will be a case of having the relevant forms sealed by the court (being an extremely quick process). Alternatively, if there is an outstanding winding up petition, the appointment can only be made by way of a court order.
This is similar to the administration process, which also carries a moratorium, however the main difference is the board retains control of the company, instead of handing control over to the administrator.
To be eligible for a moratorium the business must be a limited company or LLP registered in the United Kingdom. The moratorium cannot be applied for by financial institutions such as banks, building societies and insurers.
Aside from this, the following criteria applies:-
Before accepting the appointment, the monitor will need to carry out a viability assessment on the company to determine the route by which the company will return to being a going concern.
Upon the appointment being made, the monitor will notify the company’s creditors and other relevant authorities of the moratorium taking effect. A notice confirming the company is subject to a moratorium should also be displayed prominently on the company website and physically on any shopfronts.
What happens during the moratorium?
Once the moratorium is officially in place, no legal action can be taken against the company and creditors cannot chase payment for pre-moratorium debts.
However there are a number of restrictions on what the company can do, without permission of the monitor, including:-
The company must also continue to pay the following during the moratorium period:
The monitor will work with the board of directors to ensure the plan to rescue the company as a going concern remains viable and to ensure that all of the above restrictions are being complied with.
If it’s no longer possible to rescue the company or the company cannot pay its moratorium debts, the monitor must immediately bring the moratorium to an end.
Alternatively, if the company is unable to be rescued as a going concern, the moratorium will come to an end and the company will likely have to enter into liquidation or administration.
The moratorium cannot be used to plan for a pre-pack administration, so the company will again be exposed to creditor actions whilst preparing to commence either of these processes.
The moratorium will no doubt be an extremely useful tool moving forward to assist with business rescue and restructuring, particularly when the company needs breathing space to put forward a company voluntary arrangement, informal arrangement, or Time to Pay.
If your business is under significant pressure, get in touch with us to find out how you could benefit from the latest insolvency tool.
Without it, no business would be able to function because they couldn’t get the word out about their products to the exact segment of customers most relevant to them.
Sadly it gets a bad reputation as some people and companies use this precise tool like a blunt instrument. When was the last time you were able to buy something without handing over an email address?
One of the negative examples is when an existing service or product is rebadged or repackaged to look like a brand new proposition - when it’s exactly the same thing that was being sold/done before.
The late Anthony Bourdain explained it perfectly in The Big Short - “It’s not old fish, it’s a brand new thing!”
Which brings us to Pre-pack administrations.
In the past week alone, Oak Furnitureland, Accessorize, Monsoon, Le Pain Quotidien and Quiz have all been sold through pre-pack administrations while Bensons for Beds and All Saints are the latest companies to serve notice of appointing administrators with a view to being sold through pre-pack administration.
At least once a week, we have conversations with clients where they ask if they should be considering one of these new pre-pack administrations they’ve been hearing all about.
And because we’re insolvency professionals, not super slick sales sharks, we’re honest and tell them that pre-pack is just one of the many insolvency tools we have available to help their business and while it might be appropriate for some companies - its use is very specific.
There will be a solution for any company looking to take the time to restructure the business and the finances and come out of lockdown fighting fit and ready to re-establish themselves - it just might not be the one that everybody’s talking about.
Contact us and we’ll arrange a free virtual initial consultation with you at a convenient time.
We can get a deeper understanding of your company’s position and your plans and work with you to come up with a comprehensive plan to get there.
A pre-pack administration may be the best solution for your specific situation. Alternatively, a Company Voluntary Arrangement might be the optimal solution or events have changed the fundamental outlook for the business then liquidation may be the preferred method to close one chapter and allow you to open another.