Please visit https://www.companyrescue.co.uk/ for confidential help and insolvency advice or email keiths@ksagroup.co.uk

Monday, 28 July 2008

Rescue companies in Scotland??

Well there aren't many companies getting rescue help in Scotland!

Amazingly, in Scotland in 2007, only 6 companies were rescued by a company voluntary arrangement or CVA! I think that is staggering! It is a small country of course, but here are the 2007 statistics that shows the "Rescue Culture" has largely passed Scottish business and the insolvency profession by:

  • 539 Scottish companies were liquidated and more than 81% were wound up by creditors and the Court. Only 18.7% were voluntary liquidations initiated by the directors.
  • 75 entered administrative receivership and only 37 were restructured through the Government's preferred rescue tool - administration!
  • As for CVA only 6, yes you read that correctly SIX were saved by the CVA tool which is scandalous waste of good businesses. Incidentally HMG also wants more companies to use CVA!
  • CompanyRescue wrote 4 CVA's in Scotland last year or 75% of the total approved.
  • Of the total stock of Scottish insolvencies of 657, some 66.66% were aggressive liquidations by creditors
  • Taking Administrations and CVA's as "rescue" tools only 6.5% of all Scottish insolvencies were rescued. Less than 1% used a CVA.
  • BURIAL accounted for 93.5% of all Scottish Insolvencies.

So the standard approach in Scotland seems to be - if a company is struggling, whack in a winding up petition and knock the company over. Is this so that the so called "corporate recovery" experts can feed their hungry mouths?

Any views on these statistics would be welcomed.

We are doing all we can to help Scottish businesses: this year we have had 3 CVA's approved and are currently working on 3 more. If your client is a Scottish registered company make sure they are aware of CVA!

Source of Statistics is the Insolvency Service see below.

http://www.insolvency.gov.uk/otherinformation/statistics/200805/index.htm

http://www.insolvency.gov.uk/otherinformation/statistics/200805/table7.htm

Keith

Friday, 25 July 2008

Laymans guide to pre-packaged administration sale

I was asked to explain pre-packaged administration sale the other day in laymans terms. We have published a new page for this today at http://www.companyrescue.co.uk/company-rescue/options/pre-pack-administration

If your business is facing huge problems and legal threats, there is a powerful way of selling the business on to a third party, a "newco" or to the existing directors.

Examples of the steps for pre-pack are as follows.

Step 1:

"Your Company Ltd" takes expert advice from insolvency practitioners or turnaround practitioners like us! on its very poor financial position. It is likely the company has threats from landlords, HMRC for PAYE and VAT, the bank and many trade creditors. The directors are worried about wrongful trading and their personal risk.

The business may have onerous contracts or too much property, too many employees and or lost market share/customers.

This advice should be thorough and a report prepared in writing for the board and possibly for the bank.

All options such as company voluntary arrangement, trade sale, refinancing, administration, creditors voluntary liquidation and pre-pack administration.

If good reasons for pre-pack this option should be very carefully considered by the board of directors. If a decision is taken to go down this path a board meeting should be held and a resolution passed stating the company's board will consider the option in greater detail.

Its likely the resolution will include the appointment of formal advisors either insolvency practitioners (IP), turnaround practitioners or accountants to act as advisors to the board.

Step 2:

If the plan is to sell the business (not the company!) to a "newco" then a business plan for the newco must be drawn up. We recommend that this includes detailed profit and loss forecasts, cashflow forecasts and balance sheet forecasts. This will give an indication of working capital requirements. The proposed administrator will require this as evidence that the new company can be viable.

If the plan is to sell to an existing trading company, the IP will require copies of management information and accounts from that buyer. Again this is necessary to ensure the acquiror is viable and can afford any payments for the assets being acquired.

A qualified accountant should be contracted to provide this forecast pack in my view. Our colleagues at the FD Centre Ltd can provide such a service.

Step 3: - Compliance issues.

Under insolvency practitioners guidelines (known as SIPS) the IP must market the business. Often this requires sending sales memos to a database of potential buyers the IP may hold, an advert on his website or a local or national newspaper. If he gets no interest or no indication of interest he can then sell to the newco or third party.

If there is a lot of interest and offers, beware your business could fall into a competitors hands!

He or she will also get formal valuations of the assets, intellectual property and or goodwill of the insolvent company by RICS qualified surveyors. Clearly any offer needs to be commensurate with valuations.

At this stage if you and your colleagues are planning to buy the business you must be careful. As directors of the dying company you have a fiduciary duty of care to the company and its creditors. Starting "newco" can put you at risk of conflict of interest. It's likely that you will need separate legal advice on both companies.Best to talk to a lawyer with insolvency experience.

Contact Keith Steven for a list of good lawyers.

The IP will take advice from his lawyers as to compliance and risk. He may require this advice to be paid for along with his disbursements. Strictly speaking he cannot charge time costs in advance for the pre-pack work but he will charge for consultancy.

WARNINGS?
Beware will your client's contracts allow you to pre-pack? Will your landlord(s) allow a new company to occupy their property? Are your suppliers going to supply a newco?

Step 4: - Raising finance

Look you will need finance to fund the acquisition of the assets and business. There are many specialist lenders who can provide: factoring, asset based lending, loans and bank facilities. But this is likely to be difficult to raise and will probably require personal guarantees from the directors.

Once again the funders will require a detailed plan supported by forecasts, they will want to test the valuations, the possibility of making a loss and how their security needs will be met. So its vital to get these built.

Step 5

Assuming that you have raised the finance the proposed administrator has satisfied his compliance requirements and the board of newco believe they can fund the acquisition then its all systems go.

A contract is likely to be drawn up that appoints the proposed administrator formally. He will then initiate the pre-pack administration by contacting any floating charge holders like banks or lenders with security. If they have no objections (and often they are involved in funding newco) then he can proceed.

Beware some banks will NOT allow a pre-pack to a related party. RBS for example will not countenance a phoenix with/to directors of the failed company. So it may be necessary to take out the bank first.

Assuming all is approved then the administrator makes an application to Court stating his proposals. Almost immediately after that the business is sold to a newco or third party.

This can be done on a Friday night and by Monday the business is trading virtually uninterrupted. Having bought the company name the "oldco" see its name changed to something else, like "Your Company (Realisations) Ltd".

Summary
Clearly, this is a short guide to a vrey complex situation and there are many pitfalls - with good advisors, quality practitioners and lots of determination this can be a very powerful and actually pretty quick solution. But remember the warnings above and if you are with RBS as a bank it is my experience that they will not support a pre-pack and may appoint their own administrator or receiver.

If you are interested in a pre-packaged administration you should seek proper advice, whilst considering company voluntary arrangement, administration plus CVA and refinancing options.


So if you need urgent help - call us now on free call 0800 9700539 or email our advisors on info@companyrescue.co.uk

What is your company's turnover and other funny stories

My colleague Deborah Stokes reminded me today of an enquiry we had recently. The chap ran a care home in the south east and wanted to do a CVA. When asked what his turnover was, he said 17.

"Seventeen"?? What do you mean". Replied Deborah

"Oh we have had 17 deaths in the last 6 months"! But it's alright coz the police have cleared us and we are now able to take in more residents from the council"!

Not a home that we would like to put our nearest and dearest into?

We also had an enquiry from a man who wanted to be "liquidised" Not sure how we would do that but we told him how to liquidate the company?

Thursday, 24 July 2008

High quality, common sense business banking

How often do you hear that? I met a senior HSBC banker yesterday who has been around for many years and seen a few recessions. His view was that we are in one now and its going to get nasty in the UK economy. Meantime, we were meeting because one of our clients and one of his customers has a serious problem.

CompanyRescue was appointed to assist this company after HMRC rejected a 24 month time to pay programme. this fast growing company had discovered a black hole in its accounts due to poor internal controls, rather than any fraud.

Our colleagues at The FD Centre Ltd had analysed the company's accounts and introduced Sage Line 200. Painstakingly every accounting transaction was typed in for 2007-8 financial year and eventually a £450,000 hole appeared. FDC called me in and we thought the board was strong, products were good with growing demand and the board were determined to lean form the control errors and rescue the business. My solution was to use a company voluntary arrangement to manage the debts over 5 years.

Now our usual approach is to contact every creditor upon our appointment and inform them that we are dealing with their debts, not the company, generally we ask them to wait a few weeks until the proposal is prepared and circulated. This takes the pressure off and allows the board to focus on running the business, whilst KSA restructures the debt. One larger creditor decided they did not want to do that as they felt the directors had somehow hoodwinked them. A petition was issued and it was advertised yesterday.

In my experience in every other case where a petition is advertised the bank automatically freezes the bank accounts. This is generally to prevent disposition of assets. Instead the senior banker in the West Country called the client and asked them, FDC director and me to attend a meeting with him and a regional risk manager from HSBC special situations.

We were not hopeful but after telling him what the plans were, how sales were rising, creditors were generally supportive and continuing to supply and that business was recovering he told the board he would be keeping the overdraft open and the factoring facility functioning.

Yes he put the charges up marginally to cover monitoring costs but his view was, "you are being honest and open with the bank and so, its business as usual for the bank". The special situations manager was also supportive and will keep a watching brief on the company for now. The factoring manager was also able to say she will support the company to 80% drawdown as normal.

Common sense is what we preach/sell to all clients and creditors. And common sense is what we got from the bank. I was very surprised but also very pleased for my client. As per an earlier blog - once again something new for me yesterday!

So now its time to get the CVA completed and published and then lets get it approved. This will take a further 3-4 weeks but after that the petition will be rescinded.

A great day for common sense and hopefully it demonstrates that good bankers will help customers get through this recession if that is what it turns out to be. My only fear is that there aren't enough of them with the experience and courage of this banker.

Monday, 21 July 2008

"I am right and the Insolvency Act is wrong - a TRUE tale of dogged determination

You have to admire this guy. Today I received a report from a liquidator of a company we worked with in 2005.

Some 3.5 years ago my good pal Garry Mumford and I met a London based magazine publisher and this person's business and life partner. It was a limited company that owed nearly £650,000 to its creditors.

Although trading for 10 years it had yet to make real money but it had 2 titles one of which we thought was a very good product. Like all aspiring Rupert Murdochs they thought they would shortly build a publishing empire around this and the new events they had planned to fit the magazine's readership.

"We have a cash problem but we are not insolvent" During our first conversation we had referred them to "is my company insolvent page" on our website. There it lays out 3 simple tests: the Insolvent balance sheet test, the cashflow test - cannot pay creditors when due - and the legal actions test - it had 3 CCJ's. So it actually failed ALL THREE tests under s123 Insolvency Act 1986.
Quite comprehensive you may think? "NO we are not insolvent" said the life partner, our business is worth £12m. "The titles could be sold for that easily"!
Sharply bringing the discussion back down to earth we pointed out that as directors they were breaching their fiduciary duty towards creditors, the company was facing a winding up petition threat from HM Revenue & Customs and they needed to act quickly or face personal liability in liquidation and possible wrongful trading.
Seeing sense the publisher agreed and appointed us to restructure the costs, the debt and the business using a company voluntary arrangement (CVA). Disputing the debt, Mr G still insisted he was right, we were utterly wrong and refused to take part.
Given he was a director this may have been a problem but the other director agreed and this did not prevent our work getting done, although he singularly refused to believe the threatened petition was real or that HMRC were quite cross with the company.
My team had talked HMRC into not advertising the petition that they did subsequently issue, so we managed to put together a CVA and then published it after a few weeks. At the meeting HMRC REJECTED THE CVA. This was a shock for KSA as we actually get 97% CVA approval.
The reason for the rejection was a "consistent disregard for HMRC rules and reporting over a period of 7 years, allied to being late with EVERY VAT return and PAYE return for 7 years" They added " HMRC do not believe the directors are capable of complying with the tax rules and we hereby reject the proposals".
Quite categoric then, and this from a Civil Servant! So with the company facing winding up, the publishing director saw this coming and lined up a sale through a pre-pack administration. The business, now without Mr G, is now performing quite well we believe.
So that's that? Not likely. After the liquidation (following on from Administration) had been going 15 months Mr G made an application to court to "rescind the liquidation and the administration preceding it" saying he does not reorganise that the company was insolvent and does not recognise that the company had been placed into the insolvency regime of administration.
Mr G is very sure that everyone else is wrong and he is right.
So yours, truly, Garry Mumford, Eric Walls (the CVA nominee), SFP the administrators and liquidators and the small matter of a High Court Judge and the Insolvency ACT 1986 - are all WRONG and he is right.
One man crusade or certifiable madness - you decide.
You really could not make this stuff up could you?

Friday, 18 July 2008

Social networking and the middle aged

Well I have joined MySpace whatever that is? Hopefully I will learn how to use it and it will help people find our websites; or thats what Iam told it will do!

So click here if you want to see what my profile looks like

http://www.myspace.com/keithsteven

If you are like me and have no friends at MySpace why not contact me and lets be friends together! That's sounds a bit sad eh?

Your's "nobby no-mates"!

PS-Have a good weekend, looks wet again!

Thursday, 17 July 2008

Cannot see the wood for the trees??

We can!


CompanyRescue offers a free consultation to all struggling businesses online and or on the phone. I have 7 great trained insolvency advisors who can answer most questions that you or your clients might have.

With hundreds of pages of information online at http://www.companyrescue.co.uk/ you can access this resource first but, then if you have a personal or specific question, that the general guides don't cover, you can call 0800 9700539 free of charge.


Common questions we get include:





WILL I LOSE MY HOME?



These are popular questions amongst hundreds of others that my marvellous team can answer in English not gobbledygook, along with examples of how to deal with these problems.

These guys really care about your enquiry and will not just give you platitudes, if they cannot answer straight away they'll get answers internally or from our lawyers or insolvency practitioners and call you right back.

For many technical problems our team will pass the enquiry on to me or Iain Campbell. Personally I have dealt with thousands of enquiries over the years but every day we get a situation that we think, "wow, that's an interesting one"!

That's
why I love this business! Its always challenging you with new problems and new scenarios!

We handle hundreds of enquiries every month. SO what can we do for you, your business or your clients business?

Got a problem or unanswered questions? Why not give us a try, we are friendly, blunt and accurate in our answers - call us on 0800 9700539.




We can show you the difference between the wood and the trees!



Keith


Tuesday, 15 July 2008

Lies, Damned Lies and Statistics

You can see we have linked our blog to Rachel Elnaugh's blog (ex Dragons Den), she has been invited to advise Parliament's Business and Enterprise Committee along with James Caan, Doug Richard to give evidence this week on how Britain can create a 'higher added value economy'

I commented on her Blog that whilst they may appear to listen Government does not seem to act on such reports and committees. We have featured a report on http://www.companyrescue.co.uk/ into the low levels of adoption of the CVA tool in the UK which was initially commissioned by the DTi .

Author Tim Mocroft interviewed 5-10 of our clients in 2003-4 along with a number of other companies in CVA. When he published his report he stated that he thought CVA was a great tool, but it was seriously under utilised, it was almost completely unheard of by business people and banks alike and he laid the blame at the door of DTi (now BERR) and the insolvency profession.

So it was not a suprise that DTi refused to publish it for fear of upsetting The Insolvency Service, the DTi and the insolvency profession. A think tank called CSFI (Centre for the Study of Financial Innovation) DID publish it.

Called "Companies Cannot Do It Alone" it laid out some recommendations to increase the use of CVA's in the UK. These included more publicity from Government to improve awareness of the CVA, education for business people on the options available....


"Nevertheless, we can say with some confidence that, for the CVA process to become firmly established as a method of company rescue and for its potential to be fully exploited, several
conditions need to be met:


- the CVA process must be publicised much more widely;

- company managements must be made more aware of their options for rescue; and

- more (and better) independent help/advice must be available to company
managements".


You can download a copy by clicking this link.

Please feel free to read this important report and email it to anyone who may be interested. I am happy to discuss any of the report findings and or publish your views or comments on the CVA tool, insolvency practitioners' views about CVA or any other comment. Please email me at keiths@companyrescue.co.uk or click the comment box below.

Have a good Tuesday! Keith

Monday, 14 July 2008

Estate Agencies, Construction Companies and the real world impact of Credit Crunch

On Friday my colleague Iain Campbell was in the Midlands working with the directors of a medium sized Estate Agents that we are helping to restructure. It was his dubious pleasure to advise many of the employees that their jobs were going.

Now normally, directors have to consult with staff for months, choose the roles that are being made redundant before using skills matrices to select the unfortunates. Usually taking advice from HR consultants along the way for fear of Tribunals.

NOT in CVA! using the powers of the CVA process we have quickly taken the costs of this company down to survival levels. No payments for redundancy or lieu of notice are payable by the company. Directors have reduced their own packages too and the overheads are much lower now. Any tribunal awards (very rare) are simply frozen by the CVA process.

Even if the housing market (or more appropriately the mortgage market) remains locked for months ahead, which looks likely, this company can survive now.

Looking at the wider picture, the credit crunch really does impact directly on those people like construction company employees, estate agency staff, advertising sales people. In the last month we have removed scores of people from their jobs using CVA. They will be having a tough time finding new employment I think which we cannot dwell too much upon.

What sector will this so called credit crisis affect next? Senior bankers, smart financial sales people who sold fancy debt packages?

No thought not.

UPDATE 7.30am July 15th 2008

London: The Times reports today that "estate agents report lowest level of home sales in 30 years as lending is squeezed". RICS reports that sales fell 40%. Guys thats old news - its over 50% for some our clients and other people contacting CompanyRescue!

Saturday, 12 July 2008

The rain in England? Weather and economy

Well back today from Spain, its raining here suprise suprise! We travelled up from Plymouth to home yesterday through virtually non stop rain. Now sitting in my office and its pouring with rain outside, what a great summer. Well at least we had a week of sun in northern Spain before we came back. Now feeling nicely rested and slightly broke!

I have read some of the papers since returning from holidays and it seems that economically there is unremitting gloom, many commentators are saying that things can only get worse - but frankly I think that we ain't seen nothing yet.

When the true nature of the financial instruments sold at the height of the boom last year are known there will be major write downs, further bank failures and many more jobs lost in the City and across the financial sector. Well at least people reading the papers now know that there is a lot of trouble ahead and that the boom time is over.

We will see "make do and mend", austerity and a sharp reduction in personal spending. For those old enough to remember its a wee bit like the "loadsa money" period of the 80's personified by Harry Enfield's greedy character, which came to an abrupt end with the recessionary period of 90-92, or deja vu is coming your way soon!

I read a great book by Jim Mellon & AL Chalabi called "Wake Up" some two years ago, their initial predictions seem to be steadily coming true. If they're right then property will collapse by more than 50%, bankruptcies will rise, companies will feel the draft and unemployment will be a real problem.

So that's alright then! Seriously though this book is worth a read. I have provided a link to their website above.

Well now time to clear the desk before the real work starts again Monday.

Tuesday, 8 July 2008

Recession 'looming' for UK firms

I read on BBC business news this morning that the British Chambers of Commerce announced today in a survey of 5,000 SME's that

"The UK is facing a serious risk of recession within months, the findings of a survey of almost 5,000 small and medium-sized businesses suggest. The British Chambers of Commerce's (BCC) quarterly report found the credit crunch and rising costs had dented the most important sectors of the economy."

If your firm is facing problems then get take action NOW

The easy stuff you know but here are three TOP TIPS for surviving the recession

First use our cost cutting guide here look hard at EVERY pound your business is spending. This could be a recession of 1-2 years and only the lean and mean will survive.

Second: look at your prices, can you increase them? A rise of 5% in prices could increase your margins by 25% if for example your GP is 20%. Yes customers will complain. Tough action is needed to survive. They may well be doing the same!

Third: consider your marketing. Are you using all tools available to reach NEW customers like Google, EBay, telephone calling, email marketing and so on. Most of these are simple and cost effective.

But the most important marketing thing to do right now is CALL your customers! Ask what they need, how are they getting on? Will they be changing orders or demand for your product/service? Did they know about your new services or products? Tell them what your firm is up to. Ask can you call them every month so you can keep in touch in tough times? That way you show you care about the business your are doing with them. AND you may get orders or provide additional services.

The old marketing adage is "the money is in the list". In other words go through your database of customers and grow your relationships. It is 10 times easier to sell to a customer than find a new one!

Follow these tips to help your business survive. If you need more radical changes then set out a business plan on one sheet of paper and try to follow that plan. You may need outside advice so call your accountant, speak with your bank manager, consultants or call us if you need confidential advice.

Regards

Monday, 7 July 2008

The rain in Spain and other tales


Sitting in a bar in Potes in the Los Picos De Europa mountains - magnificent views and very low prices. I cannot help but compare it to the UK.

In this small town of say 2,000 people these are the things that they don't suffer - unlike us in the UK where every rule is GOLD PLATED or so it seems.



  • No worries if you want a carrier bag for your daily shopping.

  • Little corner shops, small supermarkets and town market. Not dominance by the big 4 supermarkets, price to match. $0.48 for a San Miguel!

  • No segregation of rubbish: pile all in the big bin and we will move it manana (and they do), like you will get fined here for over filling a wheelie bin???? No chance!

  • Everyone smiles, even though our Spanish is hopeless and their English is non existent. they are happy to help even if we cannot converse.

  • No traffic jams. regular, carefully planned and sensible well maintained roads. Some of their driving is very interesting!

  • Excellent policing - they are everywhere. So there is little or no crime or violence even if the local Cidra (cider) gets them well oiled at nights.

Spending time here I am drawn to the conclusion that we are really killing small business in the UK and taxing the consumer to penury: and what do we (the small businesses and the customers) do about it?


If you are at your desk reading this I hope you enjoy a great holiday when its your turn. Me I am off to have a glass or two of Rioja



Keith

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