Because last year was so unusual, a lot of people might have forgotten some of the golden rules for getting through the season with their mental equilibrium and waistlines intact with the various parties, events and family gatherings to juggle.
It’s also the same with money and gift buying.
Some people think they’re being efficient by shopping for everything they need in one big go - but then have to manage a large bill which will leave them short for the rest of the month or until their next pay period.
Others will buy some presents in November, or earlier, pay them off, then get the rest in December and pay that off when they can so it means their finances will be more manageable.
This also applies to businesses as well. How many would be able to pay off all their debts in one installment if they had to?
Or if they have several debts owed to various creditors and repaying all the minimum payments at one time would be impossible or leave them with very little working cash for the rest of the month?
A company voluntary arrangement (CVA) could be the solution they’re looking for to deal with their debt problems.
How much would a CVA cost me? Find out here with a personal calculator
A CVA halts all debt recovery actions against a company while a licensed insolvency practitioner works out the repayment details with their creditors.
They will write off a proportion of the debt - which could vary - in return for them making regular but manageable payments for up to five years. The arrangement will then end and all payments will cease.
It’s vitally important to remember that a CVA might not be viable or appropriate for every business.
If they could not commit to meeting a regular payment even with a large proportion of debt written off, or the debt is sufficiently large that there is no realistic way of it ever being repaid then liquidation might be the most efficient and effective way forward for the company.
But if there is a plausible pathway for the business then a CVA is a good alternative to closing down.
Chris Horner, insolvency director with BusinessRescueExpert.co.uk thinks that a CVA can be an overlooked way of keeping a business alive and giving it a chance of returning to profitability.
He said: “The best way a business can make a CVA work is if they are generally well run and profitable but their debts are weighing them down and stopping them from investing, expanding or moving to the next level.
“It’s a great way for a company to keep trading but handle its debts in a more structured and manageable fashion.
“It’s not appropriate for every business. Not every CVA is successful and some companies that enter them will ultimately go into administration or liquidation if they can’t turn their fortunes around.
“If there’s no realistic way of becoming profitable even with debts drastically reduced in some cases then a CVA shouldn’t be considered or entered into. It’s not what every director wants to hear but it’s the truth.
“It would be a waste of their money and their and our time which would be better spent working on an insolvency solution that would have a realistic chance of success instead.”
The sweet spot of success for a CVA is a small one but if a business is in it then it can be truly transformative for them in the short and longer terms.
A business owner or director that commits their business to a company voluntary arrangement is usually signing their company up for a five year commitment but one that will solve the debilitating debt problems that are holding their progress back.
If you think that your business might meet the criteria for a CVA, you should get in touch with us as soon as you can.
We offer a free initial consultation where we can talk about the pros and cons of an arrangement and also explore some other options you might not have considered such as a business viability review or insolvency moratorium which could give you even more time to ultimately reach the correct course of action for your company.
That might be a CVA or could equally be another insolvency process.
Whatever is the right path for you and your business, we’ll be there to guide you down it - every step of the way.
After an unexpected decline in the number of company insolvencies in the UK in July, the August total rose to levels not seen since before the pandemic according to the latest official monthly company insolvency statistics released by The Insolvency Service.
For England and Wales alone, the total number of corporate insolvencies for August 2021 was 1,348 - this was up 251 from the 1,097 recorded in July and is 71% higher than the 788 insolvencies recorded in August a year ago.
The total is also broadly similar to the pre-pandemic total of 1,366 from August 2019 and represents the fourth consecutive month both of insolvencies numbering over 1000 and being higher than the same month a year previously.
Of these 1,348 company insolvencies, the vast majority were Creditors Voluntary Liquidations (CVLs) making up 1,256 of the total amount.
Additionally, there were 35 compulsory liquidations; 55 administrations; 2 company voluntary arrangements (CVAs) and zero receivership appointments.
Breaking these down further we see:
There were 89 company insolvencies in Scotland last month, up from 72 in July. This was also nearly double the number from a year ago and was 13% higher than in August 2019.
This comprised 11 compulsory liquidations, 76 creditor voluntary liquidations and two administrations. There were no CVAs or receivership appointments recorded.
From a historical perspective, compulsory liquidations have been the most common type of insolvency recorded in Scotland but since April 2020 there have been more than twice as many CVLs as compulsory liquidations. This has now been the situation for 15 out of the previous 16 months.
In Northern Ireland there were 9 company insolvencies registered which although five less than in July it was more than double the number from a year ago although 59% lower than August 2019.
This was made up of eight CVLs and one compulsory liquidation.
The overall total of UK company insolvencies for August 2021 is 1,446, which is up 266 from last month.
Colin Haig, President of R3, the insolvency and restructuring trade body said: “The insolvency figures published today highlight how much tougher the climate is for businesses and individuals than this time last year, and the toll the pandemic has taken on business and personal finances over the last 12 months.
“The increase in corporate insolvencies was driven by a rise in Creditors’ Voluntary Liquidations (CVLs).
“Numbers for this process were 115% higher than this time last year, and 30% higher than in 2019, which suggests that despite the opening up of the economy, there are a number of company directors who are opting to close their businesses after a year and a half of trading in a pandemic.
“This comes despite the fact that August was one of the better months for businesses since the start of the pandemic. The lifting of the final restrictions and continued impact of the vaccine rollout means that more people are working, shopping and spending and that looks set to continue as we enter the autumn.
“However, with the furlough scheme closing at the end of this month, company directors need to be aware of the signs of business distress and seek advice if any of them appear.
“If a firm is having problems paying rent, staff or suppliers, has issues with cash flow, or its directors are concerned about its future, now is the time to seek advice from a qualified professional, rather than waiting until the problem has become worse.”
The numbers couldn’t be any clearer.
For the fourth month in a row, company insolvencies are higher than they were a year ago and now are nearly back to where they were before the pandemic began.
This is before the furlough scheme finally winds up at the end of September and winding up petitions can begin for businesses that owe creditors over £10,000 - under this amount continues to be suspended until the end of March 2022.
As HMRC begins to increase their clawback of outstanding debts including overdue bounce back loans and VAT arrears, the next few months look increasingly tough for businesses already struggling with their finances.
If there’s a time to look for help and get expert advice on what options are available then it’s now.
Any business owner or director taking advantage of our free initial consultation might be surprised at how much room to maneuver they actually have, but until they get in touch and let us know their situation - they won’t know for sure.
What we know for sure is that the longer businesses leave it, the less opportunity they will have to act when they really need to.
The Twilight Zone was an innovative and groundbreaking TV science fiction and mystery series made in the 1950s and 60s.
It’s been rebooted several times but some of its most famous episodes have been updated and parodied so much that they become part of the general culture.
So much so that the original moral of these stories tends to get washed out and forgotten in the retelling.
One great example of this is the story of “a kind of stopwatch” that was remade as a film called Clockstoppers and as a part of The Simpson’s Treehouse of Horror halloween specials.
Both in the original and in the Simpsons version - a man or Bart and Milhouse acquire a stopwatch with one unusual extra feature - it can be used to stop time itself.
Like previous owners, they misuse the power, it breaks and while they ultimately repair it they remain marooned in time for several years.
The moral is that while it might be nice to stop time, it can’t be done permanently and time eventually moves on and catches up with us.
But what if you could pause time for long enough to give you space to work on ways to improve the financial outlook for your company or that could stop or freeze creditors actions while you arrange advice and assistance so that when they restart, your business would be in a stronger position to engage with them?
An Insolvency Moratorium might be the answer you’ve been looking for.
It allows businesses to have an enclosed legal breathing space away from creditors’ recovery actions like winding up petitions or bailiff visits while a recovery plan is formed.
This will restructure the company's debts and give creditors more chance of ultimately being repaid rather than seeing the company go into liquidation with the increased risk of not receiving repayment.
When first granted, an insolvency moratorium automatically lasts for 20 working days.
This can be subsequently extended for another 20 business days if required with more extensions available for complex cases and only with the consent of creditors themselves.
An insolvency moratorium is different from administration or a creditors voluntary liquidation (CVL) in several ways.
The company directors remain in control of the business and continue to run it on a day to day basis but a monitor is appointed to make sure that all conditions are being adhered to.
Of course the business also has to keep on paying any rent, employment entitlements or any liabilities that come from financial service contracts and the monitor’s fees and expenses - although this is agreed in advance.
What happens when a moratorium ends and time restarts?
Depending on various factors there are several ways an insolvency moratorium can be resolved.
The business raises new funds and investment from shareholders or directors own funds, or it could include a business loan secured with the aim of consolidating existing company debts into manageable payments.
A CVA is arranged with the creditors approval and the business continues trading and making regular monthly payments to creditors in return for being allowed to continue to trade and a proportion of existing debt being wiped.
Preferably after taking professional advice, the directors or business owner reach an informal payment plan with their creditors to begin paying down the debt. Additionally, if tax arrears are owed then a formal Time to Pay arrangement could be reached with HMRC.
Missing repayments for both could have serious consequences so should only be entered into carefully.
Sadly not every business can be saved even with an insolvency moratorium. If the debt and other issues prove to be insurmountable then the moratorium is ended and the business enters administration or liquidation.
“If you knew time as well as I do, you wouldn’t talk about wasting it” - Alice through the looking glass
Rules are changing at the end of September for winding up petitions and several other instruments including the final end of the furlough scheme.
The end of the year is in sight and the remaining weeks and months should be spent trying to regain momentum and build up to the best Christmas trading period for at least two years.
But what if you’re struggling with deciding which repayments to miss or trying to raise enough liquidity to make the minimum costs needed to avoid running up arrears for bounce back loans or other borrowing?
Even before thinking about an insolvency moratorium or other procedure, you should get in touch with us.
We offer a free initial consultation for any director or business owner who needs some impartial, expert advice on what they can do to help get their business back in shape for a hectic end-of-year period.
You could have more options than you think and if you’ve acted quickly, could even start to implement them and see results very soon.
However time will continue to tick by and if you don’t use it wisely then you could still have the same or worse difficulties later but without the time to fix them.
Which not even a magic stopwatch could help you with.
The ones that if solved or removed, would be a launchpad for the success that would likely follow because all the other fundamentals are strong.
It’s a problem video gamers come up against quite often.
They face a seemingly-impossible end of level boss that no matter what strategy they try, they cannot defeat and get past.
Countless hours have been invested and the familiar but rarely sincere “just one more go” has been invoked more than once but the only certainty has been the same negative result.
In the age of Youtube, Twitch, Discord and even gaming performance coaches - there are more ways to find this assistance - amateur and professional - than ever before so they can proceed towards their final goal.
Which brings us back to businesses in the same situation - where’s their solution and video guide to get them past their immediate insurmountable hurdle and help them to literally level up?
The good news is that it’s far easier to find than asking a bigger kid in an arcade to do it for them.
An administrator can be their extra life and give the company the fresh start it’s been reaching for - preserving jobs and giving the business a power up just when it needs it - but it does come with risks.
To clarify, administration is a formal, legal insolvency process that places an external manager - the administrator - temporarily in charge of a business with the aim of turning its fortunes around and saving the company.
This is a serious decision that can have ultimate consequences for a business so should not be entered into lightly or without getting professional advice first to see if it is the most appropriate course of action.
If this is the case then administration is a proven method of helping otherwise viable businesses restructure and regroup before reemerging stronger than before the administrator takes temporary charge.
Another important point to remember is that the administrator represents the interest of the company’s creditors at all times, not the management.
They’re there to make sure creditors can see the best possible return on their expenditure. If that’s through returning the business to profitable trading then they will pursue that option.
If it’s selling the business under a pre-pack arrangement to new management then that will be their chosen course and if the last recourse to secure their money is through liquidating the business and selling the company’s assets off to generate the best return - then they’ll do it.
Once an administrator is officially appointed they will produce a recovery plan which will always be based on repaying as many debts as possible and looking at ways money can be saved in the immediate and short term to reach the goal of saving the company.
They will be aided by an insolvency moratorium applying immediately which halts all creditor actions, giving the administrator time to put their plans together.
Administration is not an open-ended situation that will be allowed to continue permanently.
A creditors meeting must be held within ten weeks of the administration being entered where they will outline their proposals and their recommendations.
Depending on the unique circumstances surrounding the business - its asset portfolio, cash flow and banking situation - they will inform the creditors what the most realistic outcome will be and what the plan is to achieve it.
This may even involve redundancies or other cutbacks in the short term.
Outcomes
An administration can end in several different outcomes depending on the circumstances and future viability:
The moratorium could give the administrator enough time to solve the immediate financial issues through raising extra funds through asset sales, new investment or informal agreements reached with creditors to settle existing debts.
If this happens then it’s mission accomplished - the administrator hands back the business to the directors who will continue to run the company.
Now free of the financial problems that originally burdened the business.
An administration might not be the only insolvency procedure the administrator needs to employ depending on the circumstances.
If the debt is particularly difficult to restructure and is the main obstacle to the business trading profitably in future then they might decide that a company voluntary arrangement (CVA) is the best option to pursue.
Creditors are approached to see if they will accept a regular, monthly payment from the business in return for writing off a proportion of the overall debt.
This will usually be in their interests as they will stand to gain more from the payments than through any other method including asset sales following liquidation.
If agreed, the directors resume control of the business and it resumes trading with the new CVA payment agreement in place.
The business might be made viable once again but it might fare better under new management or owners bringing fresh ideas, energy and investment.
The administrator will market the business for sale immediately and conclude the deal while the business is still protected by the insolvency moratorium.
The existing directors might even be part of the ownership teams depending on circumstances but once the deal is concluded and the new management is in place then the administrator hands back control to this group and exits.
Sadly the debt and problems of the company might be insurmountable for even the best administrator and the only viable way forward will be to close the business down through a creditors voluntary liquidation (CVL) process.
The business is closed down in an orderly fashion and it’s assets and property are sold off with the returns going to pay off creditors in legal order of precedence.
Because the business will already be in administration before the liquidation process begins, most assets will already have been sold prior to this so once a CVL is entered into, the funds can begin to be distributed to creditors.
In the battlefield of giving business owners and directors the chance to fight another day, it’s our call of duty to give them the best advice and support possible.
We don’t claim to have a halo but if you get in touch and arrange a free initial consultation with one of our expert advisors, we’ll let you know which options and strategies would have the best mass effect on your company’s chances of recovery and renewal.
Business life is strange and unpredictable so we’ll help you go through the gears when it comes to implementing any changes you need to. It’s a far cry from leaving you to manage on your own but an essential part of our service.
If it’s time to reboot your approach, do it with a Business Rescue Expert by your side.
If a business has no viable way forward then liquidation is usually the best option - and it’s a tough decision for a business owner that grasps the reality, let alone one that hasn’t joined the dots fully.
It’s a similar pattern to the five stages of grief, first identified by Swiss American psychiatrist Elisabeth Kübler-Ross in 1969.
Some business owners go through a very similar journey when deciding what to do about a company that has no realistic path to profitability anymore.
Easily the most common phase as all the warning signs including mounting debts, VAT and bounce back loan arrears are ignored or written off as temporary setbacks or problems that can easily be solved if they have a couple of good trading months.
Sadly by the time directors understand the depth of the problems they’re facing, it’s too late to build an alternative strategy and they really only have liquidation left as a viable option.
Another common reaction to problems is to react aggressively to them.
Work harder, work longer and if that doesn’t immediately transform fortunes when you’re physically and mentally tired, reflect on how It’s just not fair.
It’s not fair that they’ve worked so hard and things haven’t gone to plan. It’s not fair that the pandemic hadn’t happened when it did, or lockdown came along, or several other things that stopped the business from succeeding again - if only they hadn’t happened.
From a business perspective, this is the phase when some of the most serious mistakes a director could make occur.
Not deliberately but because they see the solution to their company’s problems through a binary “yes/no” lens. They become more prone to think that if they can just get one loan or arrange more financing or stock, no matter how steep the terms or if they can repay at all, then everything else will fall into place and will automatically lead to a good outcome.
Offering personal guarantees for loans when they might not be able to afford it under normal circumstances is a good example of bargaining under the influence of professional grief.
Sometimes not choosing to act is a choice in itself but if you’re facing the demise of the business you’ve poured your heart and soul into, then it can easily lead to sadness and depression that will stop you thinking and acting logically and rationally.
What’s worse is that this is the time when directors need a clear focus and determination to make the right decisions under the stress of a financially struggling business - but this can be undone if they begin to lose hope and give up while there is still a chance to positively affect the outcome.
The final stage of grief is when everything makes sense and the griever understands the process, their role in it and what is expected of them.
The tragedy for a lot of businesses is that by the time owners and directors reach this stage and are mentally and emotionally able to make the decisions required to rescue or revive their company’s fortunes, it’s too late to affect the outcome.
But what directors and owners of those businesses wouldn’t give to have a genuine chance of being able to survive and could return to making money if they can keep trading for a little while longer?
For some this is the reality and what is the best course of action for these businesses?
A company voluntary arrangement (CVA) might be the perfect solution to both satisfy creditors and give the business a recognised path back to profit.
Like liquidation, a CVA is a formal insolvency process that has to be overseen by a licensed insolvency professional but instead of closing a company down, it provides a way forward for a business to continue trading and pay off debts while it does so.
The second part of this is critical as creditors have to agree to a business undergoing the process and will usually also have to agree to write off a proportion of any accrued debt in order to give the company a better chance of being viable and getting any kind of repayment.
In return for this generosity, creditors will receive regular payments to repay the remaining debt over a period of months, usually five years.
The business will continue to trade during this time, jobs will be saved and creditors will get back some of their funds whereas in a liquidation the probability would be they wouldn’t receive anything close to this amount - if any.
Big changes are coming - is September your last chance to save your business?
Another advantage of a CVA is that it immediately halts all creditor activity such as winding up petitions and bailiff visits while the process proceeds.
Chris Horner, insolvency director with BusinessRescueExpert.co.uk said: “If a company’s debts and circumstances are too difficult to overcome then liquidation is nearly always the proper way forward.
“But if directors take advice early enough in the process and there is a clear and compelling case for the business to be successful if some circumstances are changed or debt removed, then a CVA might literally be a viable alternative.
“A CVA doesn’t guarantee a positive outcome - the directors still have to do their jobs well and the business still has to make a profit, function properly and make regular repayments to creditors. If any of these don’t happen then the company might still be closed down and liquidated.
“Every company and circumstances are different and their owners and directors will have a lot of questions about the CVA process.
“But we can answer the most important one right now - does a CVA give a business hope and a fighting chance? Yes it does.”
An important part, possibly the most important part of the grieving process is time.
It’s also the one in most short supply as small problems turn into big ones in the blink of an eye. It’s the same with businesses.
Issues that can be solved and managed if tackled at the right time can become insurmountable, drastically reducing the options available to a business owner to make the necessary decisions to rescue or restructure their business.
With the end of September already in sight, the window of opportunity to act to protect a company before creditors can take action is getting smaller every day.
Don’t waste the time that’s still available to you - get in touch with one of our advisors today to arrange a free initial consultation.
Once we get a clear picture of your circumstances, we can recommend various causes of action you can take that can really make a difference but only if you act on them soon.
Otherwise time might just be the first thing to get away from you.
Technically it’s supposed to be the summer holiday season but we’ve seen precious little of that.
The main headlines this month see a few well-known firms in the construction industry entering administration while others look to close efficiently through liquidation.
How bounce back loan repayments can affect sole traders and partnerships too
KEO Films pre pack deal
The TV production company KEO films co-founded by presenter and chef Hugh Fearnley-Whittingstall has been bought out in a pre pack administration deal by Passion Pictures after declaring itself insolvent.
KEO films produced popular and award-winning shows such as “Hugh’s War on Waste '' and “Easy Ways to Live Well” and described itself as having a strong ethical brand reputation. It’s latest acclaimed documentary series to screen was “Once Upon a Time in Iraq” broadcast by the BBC.
The directors declared they were unable to put enough money into the business to maintain it as a going concern with the impact of the coronavirus proving terminal.
The deal has secured 20 jobs in the business and the new owners are voluntarily looking to repay as much of the debts KEO films owed to creditors before it went into administration.
Will Anderson of KEO Films said: “We are trying to do the right thing in a difficult situation and are trying to come to arrangements with people where we can.”
While not all of the old company’s debts could be repaid, the new owners have made offers to repay the majority of freelance employees in full.
Hugh Fearnley-Whittingstall stepped down as a director once the deal had been completed but continued to make programmes with the company under the new ownership.
Formaplex pre pack administration
Formaplex - a major manufacturer with four sites in Hampshire - which supplied lightweight plastic components to the automotive, motorsport, aerospace, medical and defence markets was bought out by new owners this month in a pre-pack administration.
The 20-year-old business was rebranded as Formaplex Technologies by its new owners and 110 posts were lost during the process.
A spokesperson for the ownership group said: “While positive progress had been made, to secure the long-term future of Formaplex, the business needed to take further steps to strengthen its balance sheet.
“As a result, Formaplex Ltd was placed into administration and we agreed to purchase the business and assets of the company from the administrators on the same day through a procedure known as a pre-pack administration.
“There has been a seamless transition of customers and employees to a new business, Formaplex Technologies. We have secured the support of all the major customers and an experienced new CEO has been appointed.”
Minster construction closes
Mansfield-based Minster Building Company went into administration with 26 staff losing their jobs.
First formed in 2007, Minster specialised in constructing supported living facilities for vulnerable citizens but due to delays in planning and construction processes due to the pandemic combined with price increases in building materials meant that most of their current projects became significantly loss-making.
All work ceased on their various work sites from the East Midlands to the North East.
A spokesperson said: “It’s a great shame that a long-established construction business has been laid low by the knock on effects of the Coronavirus crisis.
“Not only have jobs been lost and suppliers left nursing substantial losses, but the vulnerable people who would have been housed in the properties being built by the Company will suffer as a result of the inevitable delays in completing these projects.
“The UK construction sector is facing acute difficulties as a result of the pandemic and the severe disruption it has caused to its operational processes, supply chains and labour resources. Sadly, Minster will not be the last failure in this vital industry.”
Garrandale
Garrandale, an engineering company based in Derby, has gone into administration.
The 45-year-old business began designing equipment to help streamline manufacturing in the automotive, healthcare, oil and gas sectors. In the 1980s they began manufacturing production equipment for railway carriages and continued progress working with companies such as AEA Technology and Bombardier working on a system that prevented train wheels from slipping.
The company’s expertise was also sought to help build the Hadron Collider and work on the Ariane space rocket used by the European Space Agency but has now officially gone into administration with the loss of approx. 70 positions.
AM Griffiths
AMG or AM Griffiths based in Wolverhampton appointed administrators earlier this month.
The business, founded in 1899 by Arthur M Griffiths, was profitable as recently as 2020 and worked on many private and public sector projects including building many schools and hospitals and was responsible for many major landmark buildings across the Black Country.
The company was unable to secure additional work and has ceased trading altogether with the loss of 60 permanent positions.
Six Day Series
Madison Sports Group, which staged the popular Six Day cycling series in London, Manchester and locations abroad went into administration as Covid-19 forced the cancellation of all their planned live events.
A spokesperson said: “Madison Sports Group and Six Day are prime examples of companies with solid business models whose difficulties have been greatly exacerbated by the fallout from Covid-19.
“With the majority of sports events closing down completely over the past year and a half, both companies' revenue generating capabilities have decreased markedly.
"Following the financial year-end and as a result of Covid-19 events have had to be postponed due to the health concerns of athletes, staff and guests and it is not possible to quantify the impact on the business, creating a material uncertainty over its future prospects.”
Six Day launched in London in 2015 with cycling stars such as Sir Chris Hoy and Mark Cavendish and has taken the format to other major cities with other stars but the enforced halt of all activities was too much for the business to survive.
Simtom Foods
The Indian sauces manufacturer first founded in Leicester in 1977 has gone into administration with the loss of almost 100 jobs.
The business produced a range of traditional Indian foods for both supermarkets and the foodservice industry and while they had invested heavily in recent years, growing their operations, the loss of business caused by the Coronavirus pandemic and recent labour shortages placed significant pressure on the company leading to the appointment of administrators.
A spokesperson said: “The pandemic significantly impacted the implementation of Simtom’s strategic plans.
“Our immediate priority is to support employees made redundant so they can make claims via the redundancy payments office and looking for potential buyers for the business.”
Glenburn Hotel
The Glenburn Hotel, built in 1843 on the Isle of Bute and billed as Scotland’s first hydropathic hotel, has closed and gone into administration with all staff being made redundant.
The hotel overlooks Rothesay Bay and was popular with businesses and holiday makers alike due to its location and extensive facilities.
The administration has primarily been caused by significant operating costs, coupled with the fall in revenue due to the Covid pandemic whilst still having to meet significant maintenance and running costs.
A spokesperson said: “Unfortunately, having explored all its options, the hotel was unable to survive the significant fall in revenue caused by the Covid-19 pandemic whilst still having to meet significant maintenance and running costs.
“We will now focus our efforts on assisting employees, many of whom have worked at the hotel for many years, to submit their claims for redundancy and other sums due to them whilst preparing to market and sell the hotel.
“Whilst this is a sad day in the Hotel’s history, this is an outstanding opportunity to acquire an iconic hotel on one of Scotland’s most accessible islands.”
Fruehauf
A Grantham based manufacturer has gone into administration with the potential loss of 100 employees.
Fruehauf was founded in 2010 and produces a range of tipper and rigid trailers, quality control systems and techniques.
Administrators are considering several options including a company voluntary administration (CVA) as well as a potential sale to any interested parties.
Freuhauf produced around half of the tipping trailers sold in the UK and ongoing delays to orders had already led to a major trailer shortage across the entire supply chain.
The business will continue to trade while in administration but this situation might exacerbate delays.
Kapex Construction
Newcastle based Kapex Construction which was involved in a number of high profile schemes in the city has appointed administrators.
The business launched in 2016 to work on various housing schemes throughout the North East of England and employed 62 people directly last year.
The company was recognised by RICS for its work on All Saints Church, an 18th Century Grade 1 listed building which was on Historic England’s Heritage At Risk Register.
The business was in profit in 2020 but the cessation of building work for the majority of the previous 18 months has proven insurmountable.
O’Keefe Construction
O’Keefe Construction based in Greenwich has entered a company voluntary arrangement (CVA) with its creditors after suffering significant losses in the financial year to May 2021.
The business employs 178 has operated in London and the South East for over 50 years but took professional advice following severe cash flow challenges and are pursuing a CVA to continue trading while they restructure their debts.
A spokesperson said: “A CVA will secure the company’s future as a going concern and allow it to continue to service its ongoing clients.
“Crucially, a CVA will also maximise the returns to the company’s creditors, compared to alternative restructuring procedures.
“On a successful approval of the CVA proposal, the company’s shareholders will contribute additional sums to support its short term cash flow and to ensure the business has increased liquidity levels.
“The financial restructuring afforded by the CVA, alongside operational improvements made to the business, will ensure that O’Keefe is well placed to complete its ongoing and profitable work and to fulfil its client needs.”
CEO Patrick O’Keefe said: “The board was tasked with delivering the business out of the current difficulties and after taking specialist advice, has agreed to enter into a CVA to allow this mechanism to secure the long term success and profitability of the business.
“Thanks to our exceptional staff, our current portfolio of jobs is trading very well. The conclusion of the CVA process will immediately put the business on a positive footing.”
“The directors are optimistic regarding the future success of the company in view of the significant forward order book and improving project margins.”
We’re now into the last third of the year and what might be the most crucial month for businesses to get help and make essential decisions to secure their future for the rest of 2021.
September will see bills and debts continue to mount, the furlough scheme finally coming to an end, CBILS and bounce back loan repayments continuing to come due, defaults rising and the ban on creditor actions such as winding up petitions being lifted.
The time to get advice and hear what options your business has to manage its debt obligations including VAT arrears or bounce back loans is short so the best time to get in touch with us is today.
We’ll better understand your situation and be able to give you recommendations you can act on immediately to set plans in motion that will give you and your business the best chance of getting into 2022 and then working towards your medium and longer term goals.
Before any of that can happen though, you need to take action - the sooner the better - because for some companies, the end of this month will be too late.
The report found that although essential, the government’s overall response to the pandemic had exposed the taxpayer to significant financial risk for the foreseeable future and that while departments faced difficulties in responding quickly to the pandemic, these risks did not always achieve good value for money.
The committee singled out the bounce back loan scheme as one of the programmes with a high level of risk reporting an estimated £26 billion of credit and fraud losses uncovered so far.
Dame Meg Hillier MP, Chair of the Committee, said: “With eye-watering sums of money spent on Covid-19 measures so far the government needs to be clear, now, how this will be managed going forward, and over what period.
“The ongoing risk to the taxpayer will run for 20 years on things like recovery loans, let alone the other new risks that departments across government must quickly learn to manage.
“If coronavirus is with us for a long time, the financial hangover could leave future generations with a big headache.”
Among the main conclusions and recommendations in the report are:
The report also highlighted the work of the National Audit Office’s (NAO) Covid-19 cost tracker which tracked expenditure and costs across the whole of government and pulled them together in one place.
The NAO are working on a follow-up to their October 2020 report specifically into the bounce back loan scheme.
It is scheduled to be published in the winter of 2021 and will update their findings on the overall amount of bounce back loan arrears that have been repaid to date and how much remains outstanding.
We’ve been reporting on bounce back loan arrears and repayment scenarios since April including regional and industry differences so know that whatever number they come up with, it’s going to be big and focus will then shift from data collation to debt recovery.
Businesses with bounce back loan arrears are being stopped from closing down
HMRC and the Insolvency Service are going to be very busy for the rest of 2021.
They are already using their existing powers to close down businesses and sole traders who falsely obtained bounce back loans and are turning their attention to companies who took them out legitimately but have built up arrears.
A recent FOI inquiry from BusinessRescueExpert.co.uk revealed that they are being helped by the Department of Business, Energy and Industrial Strategy (BEIS) who are objecting to companies with bounce back loans from being struck off the Companies House register.
And the final piece of the enforcement jigsaw is still to come with the introduction of The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill which is proceeding through parliament at the moment and expected to become law before the end of the year.
Amongst the new powers it will grant The Insolvency Service retrospective powers to investigate the directors of companies that have been struck off to examine the circumstances of the dissolution.
Because the powers are retrospective, they can go back two or three years after the fact and are not limited to bounce back loans but other debts too.
Any director targeted under the new law could reasonably expect sanctions including fines, disqualification of up to 15 years and potentially being made personally liable for repaying any illegally obtained debts and costs incurred.
With the remaining government support measures being withdrawn at the end of September and creditors actions such as statutory demands and winding up petitions being allowed to be issued once again, businesses with outstanding bounce back loans and other debts including VAT arrears or unpaid rent or business rates will be understandably worried.
Instead of wondering when and where the first creditors’ blow will land, directors and business owners can use this time to draw up their own counter strategies starting with some professional insolvency advice.
During a free initial consultation, we will better understand the situation facing a business and give our honest appraisal of the options available, depending on what they would like to do.
Some businesses might want or be able to restructure their debts and eventually trade their way back to profitability with creditors help and forbearance through a company voluntary arrangement (CVA).
An alternative option might be a company voluntary liquidation (CVL) if there is no realistic path to recovery.
This will allow the orderly closure of a business even if it has bounce back loan debt and other outstanding arrears that it can’t reasonably clear.
There are choices and chances that can be taken - but only if the directors or business owners act in time to access them and work with us to act on them.
This is because they’re more susceptible to immediate fluctuations rather than gradual trends.
The number of company insolvencies declining across the UK in July after rising for two consecutive months was still a slight surprise in the latest official monthly company insolvency statistics released by The Insolvency Service.
For England and Wales, the total number of corporate insolvencies for last month was 1,094 - this was down 112 (9.3%) from the 1,207 recorded in June’s total but still 13.4% higher than the 741 recorded in July 2020.
While both totals are still below the 1,442 recorded in July 2019, a 24% reduction for 2021, it is the third consecutive month that year-on-year figures are higher than 12 months ago - indicating a broader recovery towards pre-pandemic levels.
112 cases is a relatively small number and combined with the residual effect of the summer holiday season and the general upward trend of cases we should expect this to begin to rise by October at the latest.
The reduction in monthly cases is the first since April and with creditor actions such as statutory demands and winding up petitions due to be reintroduced at the end of September along with the widely expected withdrawal of the furlough scheme and other support measures, it’s logical to speculate that insolvency rates will be a lot higher by the end of the year.
Of the 1,094 company insolvencies recorded in July in England and Wales there were 1,007 creditors voluntary liquidations (CVLs); 41 compulsory liquidations; 40 administrations and 6 company voluntary arrangements (CVAs). Once again, there were no receivership appointments in July.
Compulsory liquidations and administrations saw small rises from June - up three and one respectively, while there were 109 fewer CVLs and eight fewer CVAs.
The only category that isn’t lower than its 2019 equivalent are CVLs which are at the same level.
Additionally:-
There were 72 company insolvencies in Scotland last month comprising 14 compulsory liquidations; 54 CVLs and four administrations. Overall these figures were 36% higher than a year ago but 26% lower than in 2019.
Historically, compulsory liquidations have been the most common kind of insolvency registered in Scotland but since April 2020 there have been twice as many CVLs as compulsory liquidations. This has been the situation for 14 out of the preceding 15 months.
There were also 14 company insolvencies registered in Northern Ireland - 40% higher than in July 2020 but 33% lower than for July 2019.
This was made up of one compulsory liquidation, nine CVLs and an administration.
The overall total of UK company insolvencies for July 2021 is 1,180, an overall decrease of 115 from last month’s collective total.
“It will take longer for the worst hit sectors to recover from the pandemic”
Colin Haig, President of R3, the insolvency and restructuring trade body said: “The month on month fall in corporate insolvencies was as a result of a drop in compulsory liquidations, CVLs and CVAs.
“However, this is the third consecutive month in which year-on-year corporate insolvency levels have risen, which reflects the effect the pandemic has had on the business community.
“The 70.4% increase in CVLs this month compared to July 2020 suggests an increasing number of directors have decided to close their business after spending a year trying to survive the pandemic.
“Although government support has continued to provide a lifeline for many businesses which would otherwise have struggled in an economic climate like this, this July was still a challenging month.
“The delay in lifting the final restrictions will have hit trading, footfall and spending, and a huge number of firms have spent 15 months trading in conditions that are wildly different to normal.
“With the opening up of the economy, consumer confidence at pre-pandemic levels, and spending levels higher than they were in 2019 the future does look more optimistic. Having said that, it will take longer for the worst hit sectors to recover from the pandemic.
“SMEs are the backbone of the UK economy, but many have been badly affected by the pandemic. The restructuring community is better placed than ever to help them and other organisations with financial worries, but if directors leave it too late to ask for help, they will have fewer rescue or recovery options open to them.”
We couldn’t agree more.
One of the main advantages of getting in touch with us and arranging a free initial consultation is the earlier a director or business owner does it, the more options they will have available for their company.
Depending on their goals and ambitions for the business, either restructuring the business and its debts are appropriate or if there is no viable way forward in the immediate future then there are several efficient ways to close the business down instead.
No matter what direction you want to go in, there will be an insolvency procedure to achieve it but only if you get in touch.
Creditors will be allowed to begin recovery actions in only a few weeks so you can be sure they will be keen to exercise their options as soon as they can.
Make sure you use this time to exercise yours.
But in many ways, despite lockdowns being lifted and restrictions easing across England, Scotland, Northern Ireland and Wales, this is exactly what’s happened.
Since the Covid-19 lockdowns began the Insolvency Service has been providing monthly figures on the number of businesses that have undergone an insolvency procedure such as administration, company voluntary arrangements (CVAs) or liquidations.
For retailers the figures are sobering.
Since May 2019, 1,316 retailers have entered insolvency. This is a rate of 110 a month or more than four a week.
This is with the restrictions on creditors’ recovery actions such as statutory demands and winding up petitions that are due to be lifted at the end of September at the same time that all other Covid-19 support ends including the furlough scheme.
Why a CVA could be retails best defence against the multiple threats it faces
Earlier this year we investigated how much bounce back loan borrowing had been done by businesses in each industrial sector and found that retail businesses had collectively borrowed the most.
216,718 loans were granted to retailers while the scheme was still running for a combined total of £7.7 billion which is an average of £35,530 per retail borrower.
This is the equivalent of building a new Wembley Stadium and still having £1.6 billion in change left over.
We also looked at the estimated rate of defaults and even under the best case scenarios we modeled - 15% of loans remaining unpaid - this would still be £1.16 billion missing from the public purse.
Against this backdrop, sales are beginning to rise with annual sales growth for July for the sector standing at 6.4% although this is steady rather than spectacular as the three-month average was 14.7%.
Any positive news in the sector should be cheered at the moment as it finds itself fighting to reestablish itself on many different fronts.
Another worrying statistic to illustrate this came this week with new research published by the British Retail Consortium and the Local Data Company (LDC).
It shows that more than one in seven shops are now vacant across the country - including high streets, retail parks and in shopping centres - the highest levels since 2015 and the highest ever recorded by the LDC.
Indoor shopping malls now have a vacancy rate of 20% too, underlining how the enforced change in shopping habits over the past 18 months along with high profile brands such as Debenhams and the Arcadia Group which owned Topshop, Miss Selfridge and Dorothy Perkins, went into insolvency and liquidation after selling these brands to new operators where they became online-only.
Regionally, the North East of England had the highest overall proportion of empty shops at just over a fifth and saw the biggest increase in vacancies during the last 12 months.
Greater London proved the most resilient with a rate of 10%.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium said: “The retail vacancy rate is continuing to rise.
“Many shops and local communities have been battered by the pandemic, with many high streets in need of further investment. Unfortunately, the current broken business rates system continues to hold back retailers, hindering vital investment into retail innovation and the blended physical-digital offering.
“The Government must ensure the upcoming business rates review permanently reduces the cost burden to sustainable levels. Retailers want to play their part in building back a better future for local communities, and the government must give them tools to do so.
“The vacancy rate could rise further now the Covid-19 business rates holiday has come to an end. The longer the current system persists, the more job losses and vacant shops we will see.
“July continued to see strong sales, although growth has started to slow.
“The lifting of restrictions did not bring the anticipated in-store boost, with the wet weather leaving consumers reluctant to visit shopping destinations. Online sales remained strong, and with weddings and other social events back on for the summer calendar, formalwear and beauty all began to see notable improvement, so fashion outlets in particular saw a bounce back to pre-pandemic levels.
“As many people prepare to return to the workplace, purchase of home office equipment began to fall after months of high sales, meanwhile other homeware, such as furniture and household appliances continued to do well.”
The government is planning to publish a review of business rates in the Autumn after retailers were given a holiday from the tax throughout the pandemic. This tax break began to unwind last month and will end for all businesses in March 2022.
Lucy Stainton, Commercial Director for the Local Data Company added: “After an initial flurry of CVAs and closures due to consumer behaviour shifts and cost-cutting exercises, retailers are now starting to dust themselves off with cautious optimism, keeping an eye on the rapidly changing infection rate and the pace at which vaccinations are taking place; two measures that could seriously derail the recovery efforts should they not go in the right direction.”
Retailers expecting a fantastic sales surge will have been disappointed this summer season.
Several will have invested a lot into their businesses ahead of an expected grand reopening and if they metaphorically put their foot on the gas - they’ve got a whimper instead of a roar.
Sadly for them and every other firm struggling with their bottom lines right now - bills and debts continue to arrive even if the expected sales haven’t.
With the last of the Covid-19 support measures being withdrawn in the next few weeks and creditor actions being reinstated at the same time, it could be a sharp and uncomfortable Autumn for a lot of otherwise profitable businesses.
Because time is running out, we’ll get straight to the point - get in touch with us today.
We won’t waste your time with fancy theories or upselling you services you don’t need. We’ll use your free initial consultation to find out precisely what you’re up against, then come up with some timely and effective solutions you can start to put into practice straight away.
Things are going to get more uncomfortable for a lot of retailers before the year is out so by using the time you have now to arrange a restructuring and rescue strategy or other methods depending on your goals, you can spend it doing more important things - making more money.
But since the credit crunch and great recession of the late 2000s, they have become commonplace for most forms of business borrowing, finance and loans.
It’s not just banks that require them either. Many Landlords, trade suppliers and even consumer facing companies that provide products and services like smartphones now require a personal guarantee signed as part of any agreement to secure their repayments.
When business is running smoothly and companies can keep up with debt repayments then this isn’t a problem but the past two years have been anything but smooth for reasons we’re all familiar with.
Should you be worried if your CBILS loan has a personal guarantee attached?
A personal guarantee can sometimes be likened to a ticking time bomb at the heart of a company’s finances - especially if they hit a rough patch and have to choose which repayments they’re going to make each month. This is when it can go off.
It can be even more problematic for directors because the personal guarantee is attached to one of them and their finances directly.
If the company becomes insolvent and is eventually liquidated, the personal guarantee would still be active and they would have to fund the repayment themselves.
There are generally three options available to a director or business owner if a creditor activates or is about to call in their personal guarantee:
HMRC clarify approach on bounce back loan debt & CBILS including personal guarantees
An elegant one-two combination
One proven method to solve the problem of a personal guarantee hanging over a business is to use a combination of insolvency procedures.
If a company has unsurmountable debt including an outstanding loan which has a personal guarantee attached to it given by one of the firm’s directors, the other directors might previously assume that this would prevent them from going into insolvency cleanly and efficiently.
A combination approach would solve this.
In this example, the distressed business would propose a company voluntary arrangement (CVA) to its creditors which would see a proportion of debt (not including the personal guarantee) written off in return for the remaining debt to be paid in more manageable regular monthly installments.
The director in question would then enter an individual voluntary arrangement (IVA) themselves which would see a proportion of the personal guarantee written off, along with any other incurred debts including overdrawn directors personal loan accounts, in return for a regular repayment.
This method protects the director from personal bankruptcy, CCJs and other negative outcomes and also allows the company to restructure its debt and remerge stronger when the CVA comes to an end.
The creditors benefit from receiving two dividends - one from the CVA and another from the IVA - so will be more liable to accept a realistic proposal.
A final important point to reinforce is that if a business or individual is about to enter an insolvency procedure they should not make any payments to creditors they have a personal guarantee with before any other creditors.
There is a formal legal order in which creditors must be paid and if some are paid out of order then this is known as a preferential payment.
If this occurs then the director could become personally liable for repaying the amount back to the company in order to settle debts in the proper order.
Five words can be used to separate any struggling business from a profitable one.
They are “If it wasn’t for that…”.
No matter what “that” is, whether it’s a small or large obstacle, in the best case it’s impeding a business from moving forward and fulfilling its potential.
In the worst case it might be stopping a business from entering an insolvency procedure and restructuring itself to give it a decent chance at becoming viable once again.
No matter what your company’s “that” is - we’re sure we can help.
We offer a free, initial consultation for business owners and directors to discuss their situation and what immediate steps they can take to improve it.
Even if a business has outstanding bounce back loan debt, CBILS or other problem debt it can’t get on top of - we’ll be able to work through a solution that could be acceptable to creditors.
This lets directors get on with reestablishing the business once again.
