Friday, 18 December 2009
Well, having been in High Court this week defending (effectively) retention of title claims by publisher Hachette, perhaps Messrs Duffy, Bouchier and Whitehouse (joint Administrators) will want a quieter Christmas!
That and many rents will be due end of the month, if cash is not being raised fast then fixed costs will be too much of a mountain to meet.
As this Blog often reports Hilco and others will be combing the retail sector for the next retail failure. Why not - this week and next are critical for many retailers.
Retailers of course, should plan now for restructure. Use CVA and keep cash from Christmas sales, drive down employment costs and kill leases - a good scheme!
Or, if independent capital is available consider pre-pack.
Either way retailers under the cash cosh need to move fast. Get independent advice now.
Wednesday, 16 December 2009
This after buying Borders last month and appointing MCR as administrators. MCR has announced probable closure by Christmas eve unless a buyer can be found.
Another retail close out for Borders led by Hilco. What next for Habitat?
What next for retail failures in 2010. Big rent day due at the end of December, will retailers fail to meet rent obligations? A Company Voluntary Arrangement can restructure rents, rates, leases, and surplus employee costs and help retailers emerge leaner and fitter.
If your multiple retail company has cashflow crisis call CVA Expert, Keith Steven on 07974 086779 or email email@example.com
Tuesday, 15 December 2009
There are several options but the key options are dealt with on these pages
Time to Pay PAYE and VAT, use our programme to help you get a deal or
CVA - company voluntary arrangement
Call now for advice before HMRC get tough with your company 0800 9700539
Thursday, 10 December 2009
Either way more and more companies will try to take advantage. Our own evidence is that HMRC is now getting tougher on non compliance with TTP deals. It will be interesting to see how this pans out and what the next government will do with the easy TTP approach.
Friday, 4 December 2009
Like Winding Up Petitions for example!
Want to learn more - visit this page dedicated to that approach/technique.
If you have a threat of a winding up petition ACT NOW, call our expert advisors who can quickly help you choose solutions. 0800 9700539, or 01289 309431.
KSA has currently issued legal action to stop advertisement or injuncted 5 winding up petitions against our clients. We use an excellent law firm to assist - Masseys Law LLP
Wednesday, 2 December 2009
We are in dialogue with 6 recruitment companies right now about restructuring their businesses and in particular their HMRC liabilities. All have reported that sales have not recovered as expected when they set out to do deals with HMRC earlier this year.
Last week we completed a rescue of a £4m recruitment company in Scotland. This was a company voluntary arrangement (CVA) and was approved by HMRC with some tough negotiations and modifications.
What would the benefits be for a recruitment company going into a CVA?
•Company voluntary arrangements (CVA's) can improve cashflow, quickly.
•Stop pressure from tax, VAT and PAYE while the CVA is prepared.
•A company voluntary arrangement can quickly cut costs.
•Company voluntary arrangements can terminate employment contracts, leases, onerous supply contracts and all with NIL CASH COST.
•You can terminate landlords leases with NIL cost with a well written CVA! Unilaterally walk away from the lease, using our expertise.
•You can terminate directors or managers contracts too.
•Terminate onerous customer contracts.
•Board and shareholders generally remain in control of the company.
•Much lower costs than Administration or Pre-pack Administration
Tuesday, 1 December 2009
Please contact Angela Laxton for details:
Association of Business
120 Aldersgate Street
Tel 020 7566 4234
Fax 020 7566 4225
Friday, 27 November 2009
Thursday, 26 November 2009
Watch out for a bun fight over "sale and return" between the administrators/buyers and publishers. The book trade works on that principle.
So a test of retention of title, ownership of stock, and "cash is king" for Phil Duffy and his joint administrator(s). Sorry don't know yet who the MCR appointees are.
One year on from Woolworths another retailer fails. Is it cynical me, or are we going to see many more retailers collapse in the next 12-15 weeks?
Hilco, Valco and similar will be busy on their next deals I am sure.
Tuesday, 24 November 2009
Great shame if this business fails but not really surprising. Having been in retail once upon a time, the depth of stock and old stock at that being carried whenever I visit Borders is breathtaking.
Who will buy all those books? Well, obviously some are on sale /return but nevertheless way too much stock.
So will it be sold, pre-packed or closed?
There were 4,716 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in the third quarter of 2009 (on a seasonally adjusted basis). This was a decrease of 4.7% on the previous quarter but an increase of 14.6%on the same period a year ago.
Quarter 3 Administrations in 2009 saw a fall of 3.3% versus 2008. (974 against 1,007 in 2008).
So whats going on in the insolvency world? Insolvencies are not rising fast as was expected, why do I think this is?
See here http://www.accountancyage.com/accountancyage/news/2250779/taxman-holds-firm-rise-pay-4847204
In early October the Government announced that it was assisting 210,000 companies with time to pay tax debts by mid September. This helpline has deferred CVA's and administrations and avoided many liquidations. We assume the numbers have carried on rising although HMRC will not confirm stating....."Our current numbers are being validated and we therefore have no figures to give at present,” a spokeswoman said.
Political genius (saving insolvent companies) or fiscal recklessness (creating tax debts that may not be recovered when companies subsequently enter administration or liquidation), time will tell.
Under the scheme the landlords of 101 closing stores will receive 6 months rent and rates, this allows them time to re-let the properties and hopefully find stronger covenants.
Once again BBC reporters got it wrong, on text last night the deal was reported as a "compulsory voluntary agreement"! By today that had changed to "company voluntary agreement", still wrong but closer. Keep at it guys you may get there.
Here is an extract from the Telegraph article:
"Some 98pc of landlords approved Blacks' proposed Company Voluntary Arrangement (CVA), which means that the retailer can exit 89 under-performing stores. If the landlords had not passed the CVA, Blacks would have missed out on bank funding and would have had to enter administration.
"It is a massive relief," said Neil Gillis, Blacks' chief executive. Blacks will still pay around six months of rent for the closed stores.
Richard Fleming, UK head of restructuring at KPMG and "supervisor" of the CVA, said: "This is a pivotal moment in the turnaround of Blacks. Without the approval of the CVA, the company faced administration, putting 4,300 jobs and 291 trading stores at risk. As the third CVA of a large company agreed this year, we could well see CVAs becoming a viable and common alternative to administration."
However, Liz Peace, chief executive of the British Property Federation, which represents landlords, argued that the property sector bears all the pain in a CVA".
That last comment is interesting, it is made because these CVA's put forward by KPMG and others seem to focus on one class of creditors, the landlords of unwanted stores.
Most CVA's include ALL unsecured creditors as well as the landlords. But in this case and that of JJB Sports for example, the suppliers, tax man and other landlords of retained shops get 100% of their debts, the closed store landlords get a small dividend.
How long will it be before landlords reject these proposals and demand that ALL unsecured creditors share the pain?
Friday, 20 November 2009
How come small companies have to work very very hard, and yet companies like Orange and O2 can get away with chronically bad service, web sites that crash time after time and deliveries get cancelled or postponed????
If my experience this week of trying to buy an iPhone from their shops or online is anything to go by these companies deserve to fail. 4 days on still no iPhone.
Thursday, 19 November 2009
Talk to KSA now if you are in need of turnaround or pre-pack funding; 020 7877 0050 or call Keith Steven 07974 086779.
Up to £10m available within 7 days.
We can move like greased lightning to meet you, set out the recovery strategy and get funding on board ASAP.
Friday, 13 November 2009
Thanks to the Birmingham Post and Jon Griffin!
We highlighted some weeks ago that Blacks was seeking to restructure following the collapse of a subsidiary company and pressure from the bank. Now a CVA (company voluntary arrangement) has been filed and a creditors meeting called for 23rd November 2009
Now read Jon's story....
Dozens of West Midland jobs remain on a knife-edge after crisis-torn Blacks Leisure Group announced a last-ditch bid to save 4,300 jobs nationwide.
The outdoor and leisure group, which is facing severe cash difficulties, announced a company voluntary arrangement (CVA) proposal to try to safeguard the firm and jobs.
The CVA plan follows a string of closures of Blacks, Free Spirit and Millets stores across the West Midlands, including three at Merry Hill, two at Sutton Coldfield and others in Birmingham, Redditch and Wolverhampton.
Blacks, which recently revealed it had under-performed its six-month budget and was at risk of breaching its banking covenants, is now seeking to offload long-term leases on around 90 closed stores in return for six months’ rental compensation. If the move is accepted, the CVA would give Blacks breathing space and save thousands of jobs at 300 stores which are still trading. The company retains a string of stores still open throughout the West Midlands.
Richard Fleming, UK head of restructuring at KPMG and the proposed ‘supervisor’ of the CVA, said: “The proposed CVA gives Blacks the opportunity to preserve 291 trading stores and around 4,300 jobs.
“The CVA proposal is asking the landlords of 101 unoccupied stores to come to a compromise on the company’s financial liability.
“We believe the proposed CVA offers a fair balance between the operational needs of Blacks and the landlords’ rights under the tenancy agreements.
“The total compensation being offered to the landlords is £7.25 million, which equates to approximately six months rent each. In addition and importantly, given the size of the potential liability, the group will continue to pay rates until the leases are surrendered or forfeited in consultation with landlords.”
Lloyds Banking Group, through its Bank of Scotland business, would take a five per cent stake in Blacks following the deal, subject to shareholder approval. Should this not be agreed, Blacks will pay its bank £2 m in cash.
The CVA would last nine months if voted through by the requisite three-quarters of creditors at a meeting on November 23. Blacks has agreed new facilities of £42.5m with LBG as part of the plan.
The remaining creditors have not been asked to compromise financially but landlords of the operating stores have been asked to move to monthly payments for 18 months.
Blacks announced pre-tax losses of £18.1m in the 26 weeks to August 26, up from £6.7m, as its boardwear division and Blacks and Millets stores dragged the group down.
"The Minister for Business and Regulatory Reform has today made the following Statement.
I am setting out today the Government's response to the recent Insolvency Service consultation on encouraging company rescue.
In launching the consultation, the Government identified the importance of maintaining an effective and fair corporate insolvency framework that enables viable businesses facing temporary difficulties to turn themselves round, helping to preserve jobs and livelihoods. The consultation document invited views on a number of possible measures to further enhance the existing regime, including moratoria for companies that need a breathing space in order to agree restructuring proposals with their creditors, and measures to promote increased access to rescue finance.
More than 50 businesses, individuals, and representative bodies responded to the consultation. The majority of respondents supported the Government's view that despite the challenges faced by business in the current difficult economic conditions, the existing statutory framework for company rescue is performing well, and continues to compare well internationally.
The moratoria proposals were broadly welcomed. Respondents made a number of helpful comments and suggestions as to how the potential benefits could be maximised, whilst minimising the risks to creditors. The Insolvency Service will be taking forward more detailed development of the relevant proposals over the coming months, building on feedback received from the consultation.
In relation to rescue finance, the views of respondents were more divided. A number suggested that in practice the availability of new finance for companies seeking to restructure was less of an issue than had been indicated, and that the need for legislative change was not apparent. Stakeholders also recognised the need to balance the benefits of possible legislative changes against some of the risks, particularly if changes had a negative impact on the behaviour of lending institutions towards businesses in general. Having considered the consultation responses on this issue, the Government have decided that they will not for the moment be taking forward the finance-related proposals. We will however continue to work with stakeholders to monitor the position going forward.
Copies of the non-confidential responses to the consultation are being published today on the Insolvency Service website (www.insolvency.gov.uk), together with a summary of those responses".
So the proposals for so called super secured funding post insolvency such as administration looks like its on the back burner at best. CVA moratoria may be taken further for larger companies and possibly made less onerous for insolvency practitioners (IP's). Plus the consultation asked for comments on the creation of a new, court-sanctioned moratorium of up to three months, this would be intended to allow companies a period of protection during which they could prepare CVA proposals.
KSA would welcome this if the onerous nature of the moratorium for the nominee was diluted.
The good news is that a healthy response to the consultation has led to a good debate on the use of CVA's
Thursday, 12 November 2009
Wednesday, 11 November 2009
So started a conversation with a distressed company director with Keith Steven. After 20 minutes we established the following position.
1. The company had a turnover of £4.4m in the last 6 months. Its had previous year sales of £8.9m.
2. Trade creditors amount to c£506,000.
3. Inland Revenue was owed c£834,893 for PAYE and NIC, various time to pay (TTP) deals had been agreed and reneged upon owing to cashflow pressures.
4. VAT was owed approximately £45,000.
5. Investors funded the MBO that formed the group holding company. Investors had provided loan notes of £5.3m, interest has been accruing and interest stood at £738,365. Directors/shareholders had provided a further £808,000 of loans and interest was accruing as above.
6. The Bank was owed £550,000 on a term loan. It also provides an overdraft of £150,000 to the Group Holding Company. Currently the bank overdraft was standing at £216,000 (nominally). The bank held a debenture with a fixed and floating charge on all monies due from both companies on a charge created 17th November 2006.
Invoice discounting was provided by the same bank. The current facility provided for 85% initial payment. Overall the facility provides an advance of £1.091m. The debtor book was currently £1.329m.
Our caller wanted to know how to stop a winding up petition, how could KSA reorganise the business such that the venture capital backers / loan note holders did not take a complete bath and so that he could invest some money in a recovery whilst removing non performing directors and management. Not an easy challenge!
Given the acquisition had been driven through a "whitewash" procedure to avoid breaching the Financial Assistance rules (s151-153 Companies Act 1985) , the inter company position was that Holdings owed trading co some £700,000. This was never going to be recovered because the only value that Holdings had was 100% of the equity of trading co, it was insolvent and about to enter a administration! Secondly, the loan notes and equity investment were at risk if the trading co entered administration or pre-pack Administration.
We considered pre-pack administration but the bank was not keen on that option nor were the VC investors or the loan note holders (the director was the largest loan note holder). So a company voluntary arrangement seemed the logical answer for the trading company.
To find out more about the innovative solutions that resolved all these seemingly conflicting interests for the VC investor, loan note holders, the bank and invoice discounter, new management and the new investment see this new Case Study here - Leveraged Buy In Management Buy Out
If you are a venture capital or private equity investor with troubled clients, call Keith Steven on 07974 086779 or Eric Walls on 07787 278527.
From The Times November 4, 2009
Lord Sugar: struggling bosses are ‘moaners’ who 'live in Disneyland'
Sugar is hardly likely to worry about the bad press but somehow endearing himself to business people should be something he should carefully consider, because, lets see what's his role again?
Oh yes the Times points out that
"Lord Sugar, who is the Government’s Enterprise Champion", said: ““I can honestly say a lot of problems you hear from people who are moaning are from companies I wouldn’t lend a penny to.”
He reckons that 85% of the loan applications made to banks should be rejected!
“They are bust. The moaners are bust. They are bust and they don’t need the bank — they need an insolvency practitioner".
Interesting view from a business / enterprise champion?
PS don't ask him for a loan as you may be called a moaner!
Tuesday, 3 November 2009
A Dorset Based Precision Engineering Business
Upon instruction of the directors
Specialising in low volume prototype production, together with the capacity for high volume production. Established in 1980. The company has expanded to over £1/2M turnover per annum. Servicing the local precision engineering industry, private clients and
some international business ISO 9001:2000 accredited .
•More details here
Monday, 2 November 2009
Mr Atkinson struggles to reconcile cash turnover falling in many sectors, yet the insolvency statistics are not rocketing up. Hardly suprising with free cash support from HMRC.
As Peter Sargent, boss of the insolvency trade body (R3) says, "the problem will come at the end, when support is withdrawn".
Ah but by then an election will be really under way!
Friday, 30 October 2009
This is a more common question now for KSA.
The Insolvency Service (a Government Agency) has issued a statement saying it will use the new SIP requirements for administrators using this tool. This is called the Statement of Insolvency Practice 16.
A SIP is a rule book or guideline for insolvency practitioners to adhere to along with the legislation under the Insolvency Act and Enterprise Act.
SIP16 requires the administrator to report to creditors on their actions as follows.
Insolvency Practitioners should be clear about the nature and extent of their role and their relationship with the directors and officers of the insolvent company in the pre-appointment discovery period. Where they are instructed to advise the company, they should make it clear that their role is to advise the company and not to advise the directors on their personal position.
The directors should generally be advised to take independent legal advice, particularly if there is a possibility of the directors acquiring an interest in the assets in the pre-packaged new business or newco.
Practitioners must bear in mind the duties and obligations which are owed to the body of creditors in the pre-appointment period. They should be mindful of the potential liability which may attach to any person who is party to a decision that causes a company to incur credit and who knows that there is no good reason to believe it will be repaid, this could lead to wrongful trading issues.
When considering the restructuring or sale of the business or assets, the administrators should bear in mind the requirements of the Insolvency Act 1986. In administration these provide that:
• The administrator must perform his functions in the interests of the company’s creditors as a whole, and
• Where the objective is to realise property in order to make a distribution to secured or preferential creditors, the administrator has a duty to avoid unnecessarily harming the interests of the creditors as a whole.
Administrators engaged in a pre-packaged sale should therefore be able to demonstrate that they have considered the above. If creditors believe that their interests have not been considered they may complain to the Insolvency Service or the IP's regulatory body.
Where a pre-pack is used the following information should be disclosed to creditors in all cases, as far as the administrator is aware after making his or her enquiries:
• The source of the administrator’s initial introduction, in other words how did the case arrive on his desk.
• The extent of the administrator’s involvement prior to appointment and any marketing activities conducted by the company and/or the administrator.
• Any valuations obtained of the business or the underlying assets. We would always advise obtaining independent valuations.
• The alternative courses of action that were considered by the administrator, with an explanation of possible financial outcomes in each scenario.
• Why it was not appropriate to trade the business, and offer it for sale as a going concern, during the administration.
• Details of requests made to potential funders to fund working capital requirements and whether efforts were made to consult with major creditors
• Details of the assets involved and the nature of the transaction to newco
• The consideration for the transaction, terms of payment, and any condition of the contract that could materially affect the consideration.
• If the sale is part of a wider transaction, a description of the other aspects of the transaction.
• The identity of the purchaser, directors and any connection between the purchaser and the directors, shareholders or secured creditors of the company.
• The names of any directors, or former directors, of the company who are involved in the management or ownership of the purchaser, or of any other company into which any of the assets are transferred.
• Whether any directors had given guarantees for amounts due from the company to a prior financier, and whether that financier is financing the new business.
• Any options, buy-back arrangements or similar conditions attached to the contract of sale.
In our belief the pre-pack to a connected party will be a difficult "sell" now to creditors, unless all of these issues are carefully considered and noted. Where a business is pre packed to a third party, independent of the directors and possibly even secured creditors, then it will still be a very powerful and rapid tool.
The Enterprise Act 2002 and case law supports the use of the pre-pack sale but we also believe that in some cases this will be open to challenge, unless ALL of the issues above are considered and answered as part of the scheme. Other wise more pre packs could face challenge in court.
To complain about the misuse of pre-pack administration see this web page or call the Insolvency Service hotline on 0845 601 3546,
Is your company viable but struggling? Talk to us about Pre-Pack Administration now!
0800 9700 539 or 01289 309431
Thursday, 29 October 2009
Call Keith Steven now if you are a struggling recruitment company - 07974 086779. Keith has personally been involved in over 30 Recruitment company rescues!
For an intial chat with an advisor (free) call national helpline on 0800 9700 539, London 020 7877 0050, Birmingham 0121 378 0671, Berwick 01289 309 431 or Newcastle 0191 482 3343.
It is often quoted that there are 4.7m SME businesses in the UK. The majority are one man/woman bands and usually self employed.
My mini tax manifesto is not directly aimed at them but I am comfortable that it would generate increased revenues for the micro businesses out there AND increased tax take for the Exchequer. The aim would be to drive business out of the recession, get more new companies formed (and protect the recession survivors) and get as many people off benefits and into work as possible.
- All newly formed companies to be exempt from corporation tax for the first 2 years after formation. For fast growing successful new starts, if the company makes £100,000 net profit in the 2 year period, then this exemption is lifted and "my" corporation tax rate below applies.
- Corporation tax (CT) rates for ALL companies would be 10% for all profits up to £100,000 pa; 20% CT for all profits from £100,001 to £300,000 pa; 25% CT for all profits above £300,001 pa.
- All new companies with up to 10 employees would be exempt from Employers National Insurance Surcharge on the new PAYE scheme for one year. In year two it would be 5% and in year three the normal rate (currently 12.8% Employers’ secondary Class 1 rate above secondary threshold). The aim would be to encourage new companies to take on people faster, thus reducing unemployment.
- When selling shares in a newly formed company I would re-introduce the taper relief system for capital gains tax as follows: Any gain made after three years - 10% CGT on all gains above CGT allowance (currently £10,100 pa). After two years 20% CGT, after 1 year 40% CGT would apply, the aim is to attract investment into new companies and keep that locked in. If an investor sold her stake for gain in year one of that company's life she would be hit hard for CGT. Statistically 65% of all new companies fail within 3 years, the incentive above would hopefully see more new starts survive that terrible statistic.
- NNDR - National Non Domestic Rates or business Rates. All new companies to be exempt from NNDR in year one. Then normal NNDR applies. This would encourage companies to take on properties that may be empty and start building their businesses. With the soft market for rents many landlords would love to see properties occupied AND this would mean the landlord does not have to pay empty property NNDR (If the property remains empty and unoccupied after the three month period then Empty Property Rates (EPR) becomes due and payable at the rate of 50 per cent of the full occupied charge. There are some exemptions to empty property rates such as properties which are classed as industrial, or those with a Rateable Value of £2,200 or less).
So my "radical" tax plans would hopefully encourage new companies (specifically not sole traders) to form, take on people, properties and build businesses. In time many would of course fail, many will go on to be larger employers paying full taxes, corporation taxes, rent and NNDR. they would create growth and wealth. They would hopefully act as a magnet for business angel investors, creative venture funders and of course banks should see the ability to lend to "protected" new companies.
Some of these proposals could apply to the surviving SME's such as CGT taper relief and the CT rates. But if they have survived they are generally stronger than new starts AND with lots of new companies forming they will have new customers to sell to as well as new competitors.
Any views or experts opinion that proves that my plans are impossible are welcome!
Wednesday, 21 October 2009
We have done some research on the national insolvency statistics and the results are shocking if you run an insolvent or struggling Scottish company. Amazingly, in Scotland in 2009, only 1% of insolvent 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:
2009 Half year Insolvency Statistics -Scotland only:
•307 Scottish companies were liquidated and of those more than 75% were wound up by creditors and the Court. Only 25% were voluntary liquidations initiated by the directors.
•97 companies entered administration in H1 2009, versus 47 last year.
•As for CVA only 4, yes you read that correctly, FOUR were saved by the CVA tool which is scandalous waste of good businesses. Incidentally the Government also wants more companies to use CVA! I suppose the fact that this was 2 more than last year means the use of CVA's grew by 100%! PS we led 3 of the 4.
•CompanyRescue wrote 4 CVA's in Scotland 2007 or 75% of the total approved. In 2008 we proposed 3 of the 4 in total.
•Of the total stock of Scottish insolvencies of 361 in 2009, some 58% were aggressive liquidations by creditors.
•Taking Administrations and CVA's as "rescue" tools only 15% of all Scottish insolvencies were rescues. Around 1% used a CVA.
Therefore we could argue BURIAL accounted for 85% of all Scottish Insolvencies in H1 2009.
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. The HMRC people in Scotland are very supportive of rescues and would much rather see the company survive in CVA than be liquidated and start again.
We have never had a CVA rejected by HMRC in Scotland. We have a good working relationship with HMRC Scotland over CVA's.
If you are a solicitor or accountant advising distressed Scottish companies, please make sure they are aware of CVA's! Or if you are a director of a Scottish business please call your only hope of a rescue - KSA Group!
Source of Statistics is the Insolvency Service see below.
Apart from the weather analogies I largely agree with this comment. As commented here several times, 200,000 companies are currently benefiting from the time to pay scheme for PAYE and VAT. When that ends we will see a surge in liquidations, administration pre-packs and I hope company voluntary arrangements.
Increased tax enforcement with a rise in VAT, government spending cuts, tax rises and rising unemployment have yet to really get going. When these things do combine you could see a "perfect storm" for SME companies. Sorry about the weather theme!
Tuesday, 20 October 2009
What happens to the 70p? This is written off, usually on completion of the CVA scheme. Of course this sharply improves the balance sheet and working capital of the company.
Debts written off in Company Voluntary Arrangements are not subject to tax. Under s144 Finance Act 1994 any debts that are written off as a result of a properly agreed company voluntary arrangement are not subject to taxation.
This exemption also applies to a Scheme of Arrangement under s425 of the Companies Act 1985.
Please see this page on our website for further information and the Act details
Thursday, 15 October 2009
It is usually because the company has no assets left of course, but click the link to visit this page for the answer.
There is another favourite question - "Will I be disqualified as a director if we liquidate the company"? "No" is the general answer if they have acted properly.
Obviously, if a director has acted wrongfully (click the link to our wrongful trading guide) then he or she may be at much greater risk of personal liability or even disqualification,
Wednesday, 14 October 2009
When a company has been liquidated or the business has been sold out of administration or pre-pack administration, the directors of the new company set up to acquire and run that business should BEWARE of the ability of HMRC to demand a security deposit.
HM Revenue & Customs has the power to require a security for the payment of VAT and this can be used particularly when a business has gone through insolvency and been sold to a new company. This can have a major financial impact on the new company.
Security may be required in the form of cash, or through an approved financial institution such as a bank providing a guarantee.
Under paragraph 4(2)(a) of Schedule 11 to the VAT Act 1994, HMRC may require any taxable entity, to give security or further security for the payment of VAT that is or may become due in future.
Circumstances where HMRC will require a deposit are where it sees a risk of non payment of future VAT, where a person is or has been actively involved in an existing or previous business that has failed to comply with VAT obligations.
How much might the deposit be?
HMRC would take the previous business' VAT debts into consideration and provided the new business is similar in size to the old one, HMRC would generally calculate 6 months of future VAT as being required (if the previous and new business pay quarterly) or 4 months if the previous or new business pays VAT monthly.
Will HMRC definitely ask for a security deposit from our new company?
No, but if the previous company or directors of both the old and new company have a chequered past with regards to non compliance with HMRC rules and have regularly not paid taxes on time, or have been involved in multiple business failures, then YES, the likelihood is HMRC will seek a security deposit.
What if we don't pay the deposit (i.e. we cannot afford it)?
You must pay it or cease trading. Or if you seek to ignore the demand, it is a criminal offence to continue to trade without providing the required security and HMRC may prosecute if the deposit is not paid upon demand. Under section 37 of the Criminal Justice Act 1991 a magistrate may impose a fine of up to £5,000 for each taxable supply (ie each invoice) made without providing security.
There is a right of appeal to an independent review or tribunal.
If considering a pre-pack administration or purchasing a business out of administration the new company directors should carefully consider what impact this would have on its future working capital requirements. In some cases, this could throw a major spanner in the works where compliance has been poor in the past.
We suggest that directors, particularly with a chequered history with HMRC, take advice from any proposed liquidator or administrator before completing the transaction to buy the business back.
Is your company viable but struggling? Talk to us about avoiding this VAT security deposit! 0800 9700 539 or 01289 309431
Warning! Be prepared to lose all of your investment. Secondly, do not rely upon buying an insolvent business as your only source of future income or investment!
This brief article (and certainly not legal advice) shows you how to go about buying a business from an insolvency practitioner (IP) acting as the “office holder”. We will not describe in any detail what the differences are between the various methods of insolvency here, as these are freely available on the http://www.companyrescue.co.uk/ website
We are asked this question almost every day; "How do we buy a business out of administration or liquidation"?
First some common sense advice.
Targets; we are regularly approached by people looking to buy a business out of insolvency. Our initial question is always – “what type of business are you looking for”? When the response is “any”, then I get very worried!
There are literally hundreds of different types of business out there, do you know enough about them all to be able to save/rescue/turnaround and drive ANY type of business? Remember this is a failed company, its future depends an immense amount of hard work, some luck and generally your money.
So set up a target “term sheet”, i.e. what type of company do you want to acquire, where in the country, what size and what markets it is involved in. Set up a target price structure, make sure that you have the money or know a good source of the funding needed. Then prepare an asset/means report, most IP’s will look to see if you have the means available to buy their client’s assets.
Organise a letter from funders, banks and proof of means should then be available quickly.
Make a list of advisors who can help advise you on the deal. You may need a lawyer and accountancy advice.
Who will run the company- YOU? If yes how many days a week do you want to work in or more pertinently ON the business? If you are not going to be available to run it – do you have people available who can run it for you? If you require, KSA can help with our specialist turnaround teams.
Warning! Be prepared to lose all of your investment. Secondly, do not rely upon buying an insolvent business as your only source of future income or investment!
Accessing the Market for your Targets
There are many sources of such opportunities, but it will require some leg work.
Try all of the following:
1.Use www.business-sale.com/ to sift through opportunities
2.Subscribe to London Gazette, it lists all insolvencies daily online
3.Read the Financial Times every Tuesday – it has adverts from insolvency practitioners (IP’s) concerning the companies they are handling.
4.Do web searches for failed companies, use RSS or subscribe to BBC, news services and so forth.
5.Perhaps the most fruitful source will be to actually build a relationship with a number of IP’s such as KSA Group, or indeed a larger IP firm like Begbies Traynor, Grant Thornton or one or more of the big 4 accountancy firms. Tell them your target business types and send them a synopsis of what you are looking for. Every receiver, administrator or liquidator should market the assets or business they’re working with. So if you get on their distribution list you will get early notice once they’re appointed.
Soon you will have a flow of opportunities coming in. Make sure to have some early discussion about what the issues are and the time frame the office holder is working to.
Once you have some opportunities I would suggest using a careful evaluation method. You may wish to design your own mini “due diligence” approach to sift opportunities initially. NB this cannot replace proper due diligence if you decide to make an offer!
This should include obvious questions like:
•What, or more likely WHO was the cause of the business failure?
•Has the cause been addressed?
•What is the market for its products?
•Is there a profitable niche within the market place for the company?
•Can it be viable if sales are lower and costs are reduced?
•Is it within easy travelling time for you?
•Is the existing management capable of running the company if you are not there 5 days a week? If not who will?
•What are the business’s objectives, do they match yours (for example can it be rebuilt and make good returns)?
•What is the EXIT strategy? Yes I know you are thinking of buying it! But how would you plan to exit? Too many people get too attached to the deal and not the exit!
•What are you buying? The assets? The name? The goodwill? The customer base?
Develop your own diligence list and then stick to assessing each opportunity this way. Don’t deviate from the planned target type, size and market, unless you have wide experience. So, if you identify a good opportunity that fits your criteria then move quickly.
What is the deal?
Is it a deal to buy the assets and goodwill? Its very unlikely that you will buy the company or the debtor book, but you should consider work in progress, stock, assets (financed or unencumbered).
Then ask if the deal is one payment, deferred consideration or a mixture of upfront and deferred. It’s often possible to get a time to acquire deal. But the office holder will generally want a lump up front to cover his costs.
Get access quickly to do due diligence.
This is a must, walk around the business, feel it, touch it and ask lots of questions of anyone who will talk to you within the business.
Find out what went wrong, has the business lost its best customers, can it supply cost effectively in future, what HUMAN assets walked out the door when the IP came in? Will the hoped-for new product / service ever get off the ground? Is the management motivated or simply serving their time while looking for a better job?
Working capital Required?
Do your forecasting for the new company based on sensible numbers not pie in the sky. How much money will the new company need for working capital after you have paid for the assets? No point in buying it and running out of cash?!
The main question! Generally an IP will use a professional valuer to assess what the assets are worth in a forced sale. You will not get access to that figure, so consider using your own knowledge or that of a friendly valuer to help assess what the assets might be worth. Then set a price that you think is fair and that you are prepared to open at. Set a maximum price and do not go over that if the IP comes back saying he has higher offers and are you prepared to bid higher.
“Don’t over pay” is easy to write but hard to make work in practice.
If your offer is accepted, ALWAYS use a lawyer to advise you and check the deal and ask about technical issues below.
Trade name Issues
S216 insolvency Act 1986 precludes the reuse of trade names unless the use is permitted by the court or office holder, and the acquiror was not involved with the failed company previously. Be careful of this - if you take on the directors/managers they could face criminal charges if this is not addressed properly.
By acquiring a business you may have to honour the employment contracts of ALL of the employees. This can be another legal minefield – so get advice on it, early.
Financial Assistance Rules (s151 – 153 Companies Act 1985) make sure the deal complies with the financial assistance rules. Don't understand what that is?! Suggest you get legal advice now.
Make sure that the landlord is involved in discussions – will it offer a new lease? Will you have to put down a rent deposit? How will this affect your working capital needs?
Same goes for secured asset lenders will they novate the deal to Newco? Will major suppliers supply? Are customers prepared to work with you?
These are just some of the key issues in buying a business out of insolvency and it’s a must to do your homework very carefully. Remember don’t get emotionally attached to the deal.
It’s just worth repeating again that this is a failed company, its future depends an immense amount of your hard work, some luck and generally your money.
Finally, "if it smells it’s usually off"! So walk away and save your money for another opportunity.
Monday, 12 October 2009
Leadgate Under 11's!
Leadgate Under 13's
Above are photographs of the Leadgate under 11 and under 13 cricket teams. Pictured at their home ground in Leadgate, Co Durham, both teams have enjoyed a great season. The teams practice on Thursday evenings and play their matches on Tuesdays and Sundays. Practice is always well attended, with children from 5 to 13 enjoying a great night’s fun (weather permitting).
Whereas both teams have had an excellent season, the under 11 team has done particularly well, going through the season unbeaten and claiming the league title. Following a victory over Sunderland in the regional semi final, the side has now reached the final of the area competition which, due to weather constraints, will now be played at the home of Durham County Cricket Club early next season.
KSA is keen to support local sport at junior level and was happy to act as sponsor for the teams. The photographs show the teams sporting their KSA jackets. Congratulations to both teams on an excellent season and best of luck to the under 11's for the final next year!!
KSA Group's offices in Gateshead sponsored both teams and we are happy that they are so successful! If you wish to learn more about KSA Group Newcastle please click here
Friday, 9 October 2009
The message is therefore clear: if your company cannot pay VAT, PAYE, NIC or Corporation Tax get on with asking for a time to pay (TTP) deal NOW.
I am sure the HMRC will still allow TTP's in future but it will be more rigourous in assessing why the company needs a deal, how long it needs a deal over and how much it can afford per month. This will require a much more formal and detailed approach. And it won't be a ten minute conversation with a temporary call centre employee either!
If you have had a TTP that has lapsed or failed then we understand that a second TTP may be very much more difficult to get through. In that case we suggest using our structured, professional Time to Pay Programme (click for details).
So the largesse of the HMRC will come to an end, as a result we expect to see a very sharp rise in voluntary liquidations, compulsory liquidations, administrations and company voluntary arrangements. We also expect to see unemployment rising as a result of the increased insolvency activity, particularly in the winter/spring 2009/2010.
Thursday, 8 October 2009
Wednesday, 7 October 2009
My subject was on a company voluntary arrangement for a Limited Liability Partnership (LLP), if you would like to view the Powerpoint presentation shown on the day, please click the link below to our KSA Media Page and you will see the Powerpoint link near the top of the page: http://www.companyrescue.co.uk/mediaroom
If you would like to attend one of the remaining events in Manchester on 1st December (SOLD OUT) and London on 10th December please contact Angela Laxton. See you there!
Head of Courses and Conferences
Association of Business Recovery Professionals
8th Floor, 120 Aldersgate Street, London EC1A 4JQ
Tel: 020 7566 4210 (direct)
Fax: 020 7566 4225
Mobile: 07917 829046
Monday, 5 October 2009
Now the CEO of HSBC bank seems to agree with us!
See this article in the FT today
Wednesday, 30 September 2009
This is the ONLY website in the UK devoted solely to liquidation: http://www.companyliquidation.co.uk
Written in Plain English this site has been completely revised and is now easier to use. It sets out guides and flowcharts for the liquidation process.
With thousands of companies no longer viable after the worst recession in two generations, many now need to close. BUT the main tip we would give is do not leave it too late.
Why? Well the most common enquiry we receive at KSA Group is how do we pay for a liquidation when there are no assets and no cash??!
Frankly if a business did have assets and cash and does not have them now, when precisely did the penny drop that it would not have the modest assets left to cover liquidation fees? Did these directors run the company into the ground and take every last penny out?
Many callers to liquidate my company are amazed that they cannot wind up their failed company themselves. Given that only a licensed insolvency practitioner can liquidate a company, payment is required!
Please visit http://www.liquidatemycompany.com/ for further information on creditors voluntary liquidation, compulsory liquidation and members voluntary liquidation.
I suspect that the store leases will be determined by the CVA as they have been loss making for a considerable period. This means in plain English, " we cannot wait to get rid of 89 loss making stores where the leases have us tied up in knots"!
Additionally, around 50 head office jobs are to go.
This CVA will be interesting - will it follow the JJB plc and Focus DIY plc model? In those cases the only creditors taking part were the landlords of unwanted stores. A normal CVA would include all or mostly all creditors.
Sunday, 27 September 2009
Having put one division into pre-pack administration last week, it is now using the more morally acceptable CVA approach to restructure the main business.
I guess the penny is now starting to drop about company voluntary arrangements and how powerful they are to restructure failing retailers and other viable struggling companies
This year JJB Sports plc, Stylo plc and Focus DIY plc have all put forward CVA's. Stylo's aggressive plan was rejected however.
The article link below to the Sunday Times is worth a quick read. The author says erroneously that CVA's are used "used mostly by retailers that enables a company to agree with its creditors how its debts should be paid and to close underperforming stores".
Any viable company can use a CVA, we are currently working on CVA's for recruitment , software companies, marketing companies, accountancy companies, engineering companies, retail companies, manufacturing companies, e-commerce companies, commercial cleaning companies, packaging companies, window companies etc.
Monday, 21 September 2009
Regular readers of this blog will know that I think the formal insolvency statistics are heavily skewed by nearly 200,000 companies using the Government's time to pay programme for VAT and PAYE, (TTP).
This programme avoids the need, perhaps temporarily for some, for liquidation or administration, as their business can survive and avoid breaching bank facilities by spreading their tax debts over up to 12 months, or even longer in some cases.
If all of these companies do survive, then the insolvency statistics, when mapped against previous recessions, may show a marked deviation from the normal peak of insolvencies after a recession.
What's more, these companies are probably not reducing employment numbers by as much as they would have to, if going through a formal insolvency. Is this having an impact on the overall unemployment numbers which are also behind the recession curve?
Without using insolvency tools it is increasingly difficult and time consuming to reduce employment numbers in a company. By postponing payments of taxes out of future cashflow, directors taking their perhaps rose tinted spectacle covered eyes of the profit and loss issues in their business. We see this every day, if the tax is not due for payment now, directors often think its not due at all! We also hear "I can afford to pay our PAYE and VAT over 6 months", on a regular basis, when in truth there has been no analysis of affordability
One could argue then, that looking at the raw statistics the TTP scheme has been a success for the Government. One wonders though if the companies using the scheme have taken enough steps to cut costs and survive an upturn when it comes. Simply spreading tax payments on a wing and a prayer basis is unlikley to suffice.
Thursday, 17 September 2009
Click the title above to go to that page.
These are very common questions that we hear every day! It is often because directors have left things too long and creditors have got upset. So, if you or your client's are receiving threats of winding up petitions (usually from irate creditors OR their solicitors) then you are heading down a very rocky road.
You must get help and take action.
What is a Winding Up Petition?
This is the most serious action that can be taken against the company. Usually the company has breached any trust the creditor had, payment deals have failed, cheques bounced and generally the directors have not kept their word. So the creditor reacts with the “nuclear” option.
If a creditor elects to wind the company up, it is serious in its intent to recover the money it is owed and / or to put the company out business.
Got these threats now from Revenue & Customs or trade suppliers??? ACT now and call for help
KSA Group 0800 9700539
Wednesday, 16 September 2009
Only 24,000 people joined the list in August. I have a view that many more companies are planning more job cuts but are hanging on for green shoots.
The autumn and winter could see a sharp rise each month as we see the economy bumps along the bottom.
Monday, 14 September 2009
In that time RBS effectively went bust, Bank of Scotland was rescued by Lloyds, itself now struggling with the burden; interest rates are at all time lows, printing money is seen as a great solution to preventing financial meltdown and some £175bn has been pumped into the economy alongside the cost of bank rescues. Yet growth is nowhere to be seen.
When you read the paragraph above, it brings home just what a huge hit the UK ecomony has taken, yet like a punchdrunk boxer it keeps swaying along from crisis to recovery to crisis. Optimists claim that the ecomony is growing well, pessimists wonder if a second leg to the recession is imminent.
It's a question we will never know the answers to, but I wonder what would have happened if the government had not rescued the banks and let capitalism work?
Morever, how will we pay for all of this desperate stuff?
The Sunday Times reported yesterday that 60% of voters expect severe spending cuts alongside tax rises from June 2010 (after the general election).
Some hangover ahead?
Wednesday, 9 September 2009
In the last month I have heard this ridiculous claim in 4 separate cases/potential clients/banks.
All statements were from IP's from large firms who frankly should know better. Or if they don't it suggests to me that they simply have never bothered to use a CVA properly or they have followed the daft view that 100% of the debt MUST be repaid in the shortest time possible. Or, being cynical, they wanted the bigger fees and control of administration.
This is not true, factually incorrect and basically misleading clients, creditors and banks.
In our long experience it is true to say that the Combined Voluntary Arrangement Service (VAS HMRC) is tough but it is always fair. Indeed the service has an online guide to its approach here
This open and fair approach to CVA's includes accepting well proposed CVA's that offer the best deal possible for creditors. Remuneration levels of directors will be scrutinised and if necessary reduced as a condition of its support. If excess cash is generated by say year 5, they will ask that some of that is paid to creditors.
All fair enough.
The VAS does not expect a CVA to offer 100p in £1 in 2 years as many practitioners falsely claim. Indeed the Insolvency Act is not prescriptive about dividend levels or time frames anyway. The framework created by the '86 Act is deliberately loose to allow ANY deal to be put in front of creditors, who decide by majority vote whether to accept, modify or reject that deal.
This framework highlights the brilliance of the CVA legislation to my mind.
For proof of this being more than a rant by yours truly, please see an extract from the VAS (HMRC) guidelines below in italics. I have underlined the key points.
INS10167 - Introduction to Voluntary Arrangements
A fair and optimum offer is made to creditors
A 'fair and optimum offer is made to creditors' means that there is
•no unacceptable expenditure
•the arrangement cannot be improved upon
•all obligations under the arrangement are achievable.
Companies need working capital and some leeway for investment to keep them competitive and for contingencies such as bad debts
•saying 'no' to unnecessarily high drawings or personal expenditure does not compromise the rescue culture.
It simply requires those running a business to adjust their personal expectations to their current circumstances.
•support of a proposal is not dependent upon receipt of a minimum level of dividend.
•Judge each case separately on its merits and the available information.
If the criteria are satisfied accept it on the basis that saving viable businesses will stimulate enterprise and ultimately generate more revenue.
Explore arrangement prospects yet remain fair to those who pay on time
So the next time an insolvency practitioner says, "You won't get a company voluntary arrangement approved by HMRC" or you must pay 100p in £1 in say 3 years", tell them they are wrong.
Wednesday, 2 September 2009
In July net lending to non bank businesses fell by a staggering £8.4bn in July. The reason, bad debts and the bank's fear that much more bad debt is in the pipeline.
Vicky Redwood, UK economist at Capital Economics, noted Bank figures that showed a £365m, or 40pc, increase in write-offs on conventional corporate debt and £250m rise in write-offs on unsecured lending in the second quarter.
"While the biggest losses on 'toxic' assets may be behind us, recession-related losses on conventional loans are only just starting to come through," she said. "These losses are likely to erode much of the capital that banks have raised. Accordingly, it is understandable that banks are being cautious about lending more, even though their funding costs have fallen.
So what is going to happen in the next 2 quarters for companies looking for working capital support? I guess more of the same is on the way. Tighter business lending will inevitably lead to more pressure on businesses to cut costs, they'll avoid taking sales where they worry about getting paid, more redundancies will result and ultimately more business closures.
Would it not have been easier to let the banks go bust or agree to rescue them on condition that there was full and frank disclosure on the bad and doubtful debts the banks hold? Or is the banking system's ability to assess bad and doubtful debts so poor that they simply don't know?
Until we know what the bad debts are likely to be, I believe the banks won't lend. How to unpick that impasse is one for the debate up to and beyond the next election.
Going back to SME business lending "Vince Cable, Liberal Democrat Treasury spokesman, added: "It is becoming clear that the Bank's attempts to boost lending are only having a limited impact as banks continue to hoard money. If firms are unable to access credit it is likely we will see even more companies going under, deepening the recession and driving up unemployment."
Friday, 28 August 2009
Investment by businesses contracted on a quarter-on-quarter basis by its largest amount since 1985 and its looks like the annual decline this year is likely to be about 18 per cent — the biggest fall, outside wartime, for more than a century.
With that backdrop I cannot see a big recovery or even a small recovery in the economy. We have been saying for some time that companies, to survive the recession, have been cutting costs, reducing employment and now its clear they have also cut investment.
With 180,000 companies not paying PAYE and VAT on time (to survive cashflow crises) it is clear that SME businesses are having to "hunker down" for worse times ahead, by cutting investment, costs and employment.
Alongside consumer tax rises, next year we will see the new Government cut costs, public sector employment and investment too. Smart boards are already planning for that and cutting their cloth to fit. Coupled with falling investment as employment falls, less money will be spent by the consumer, so service sector and retailers in particular will see growth grind to a halt again after a recent rise.
So will this lead to the double dip recession or W shaped recession. Nothing is ever certain but that is what I am thinking as each month goes by.
So what of other countries? The rise in GDP in Japan is interesting. Much of this is probably restocking by companies, remember Japanese manufacturing collapsed last year. So good news for Japan ahead? NO.
This week the worlds largest car manufacturer, Toyota, decided to close a US plant and mothball two production lines (one in Britain), this is the first time in its history it has taken such actions. Does the board of Toyota see growth ahead?
Fujitsu announced 1,200 job losses in the UK . This after shorter working hours did not work in the UK. Falling revenues were to blame. No growth there then.
France and Germany also announced growth in Q2 of 2009. I also think this was driven by restocking and the bringing forward of car sales for example. Ambrose Evans-Pritchard of the Telegraph's recent article also points out that Eurpoean credit contracted recently (ie did not grow).
"We should not succumb to optimism that everything has been overcome. The whole world is in recession together and nobody alone can export their way out of the downturn. The recovery cannot last unless there is rise in global demand, and jobs are created, and there is no sign of that."
"The rebound in Germany and France is not sustainable. The state has stepped in to compensate for the private sector. As long as economic growth relies on the state, you cannot talk about durable recovery."
So lets wait and see, but it looks like a fall in GDP is ahead and it will be late 2010 before meaningful recovery in the major economies and then I think growth will be very sluggish.
Wednesday, 26 August 2009
We know many of our friends and accountancy contacts want a dedicated web site for Newcastle, Sunderland, Gateshead, Middlesbrough and all North East based business and their advisors.
We are delighted to launch http://www.companyrescuenewcastle.co.uk/ for rapid advice for all struggling North East companies.
With simple to follow guides to company voluntary arrangements, administration and pre-pack administration, and creditors voluntary liquidation its the first place to start when looking for help.
Our new site also features a Flowchart and guides section. All guides are FREE to download.
If you are an advisor to a strugggling company, please contact Keith Steven on 07974 086779 or Eric Walls on 0191 4823343.
Written in Plain English this site has been completely revised and is now easier to use.
Please visit http://www.liquidatemycompany.com/default.aspx for further information.
Visit now to learn all about wrongful trading, creditors voluntary liquidation, compulsory liquidation, liquidation flowchart, London Liquidation.
If you would like to link to this or any of our sites, please contact Keith Steven on 07974 086779 or firstname.lastname@example.org
Tuesday, 25 August 2009
Company Voluntary arrangement with hive down!
We are pragmatic experts who will always try to help you find solutions. By using a CompanyRescue CVA we can restructure viable but distressed companies. Sometimes that requires solving complex problems that can mean a "plain-vanilla" CVA is not workable. So we have used the following methods to address such complex scenarios.
As ever this is only a general guide, we cannot cover every scenario, so if you have a question or problem talk to us soon.
What is a Hive Down?
An asset, or the whole business can be hived down to a newly formed subsidiary of "Topco". Let's call this "Bottomco". It has a new clean balance sheet, no existing liabilities, but of course, no credit rating.
The board of Topco resolves to sell some or all of the assets to its subsidiary Bottomco and the consideration for this transfer is the shares in Bottomco, or cash payment can be made. Perhaps Bottomco could raise new funds to achieve this. The providers of such monies should consider taking appropriate security and or the bank debt in Topco can be "novated" down to Bottomco.
Topco is now an insolvent company, with modest or zero assets other than the shares held in bottomco which are in effect not worth anything much.
Topco can then enter a company voluntary arrangement to repay its creditors (generally not including it's secured creditors) say 30p in £1 over 5 years, or 25p in £1 in 3 months. Bottomco may then pay this to Topco in consideration for the release of the shares.
The supervisor of the CVA can take a charge over the company and its assets (shares in Bottomco) until the CVA contributions are paid over.
After the CVA ends Topco could be wound up or left as holding company for example. The people involved may buy the shares from the liquidator after valuation.
This process avoids what is known as "transaction at an undervalue" which is a breach of s238 Insolvency Act 1986. It is relatively simple in concept but legal advice is essential to avoid personal liability.
What is a Hive Across?
An asset, or the whole business can be hived across to a third party company in consideration for money or shares. This is more complex than a hive down and requires careful planning and legal advice to avoid "transactions at an undervalue" which is a breach of s238 Insolvency Act 1986. Legal advice is essential along with creative advice from CVA experts.
KSA works with one of the UK's top insolvency lawyers to ensure that a CVA with a Hive Down, or a CVA with a Hive Across mechanism are well conceived and designed, properly structured, and powerfully executed.
If this sounds of interest call Keith Steven on 0800 9700539 or 07974 086779 now.
See Daily Telegraph Coverage here...
A company voluntary arrangement is a powerful restructuring tool for retailers, manufacturers and service companies with cashflow problems.
See here for a case study of a CVA that KSA Group led last year. http://www.companyrescue.co.uk/component/content/article/7-case-studies/151-cva-case-study-logistics-and-distribution-company
Monday, 24 August 2009
This CVA (click for guide) is proposing that the company exits 38 stores, that are closed. The other 180 landlords will be paid full rent but will have to accept monthly payments in arrears. Given that landlords represent 90% of the voting creditors, it is likely that the 38 landlords who are seeing their leases determined, will not be able to vote down the 180 others whose store leases continue, albeit with variations.
The Focus CVA will see leases for empty stores terminated with two payments equivalent to six months’ rent. The DIY chain has 180 stores still trading with the 38 closed outlets costing £12 million a year in rent. While the payout is less than the lease values, it’s more than they would get if the firm went under.
The retailer has also agreed to pay empty NNDR rates on the closed stores, which would provide substantial cash savings for the landlords while they find alternative tenants.
The firm’s secured lenders, HBOS and GMAC, will grant a two year extension to the company’s £50 million revolving credit facility, which is due to expire in December.
This will be another step forward in the pragmatic use of CVA's to restructure debt and leases. The most important feedback that I have seen is that the advisors and the company have both driven this CVA by talking to key creditors about their proposals and gaining a consensual majority approach. Common-sense applies in other words.
This is a key part of our approach to ALL CVA's that we advise on. Talk to the key stakeholders, creditors and build on our initial strategy around those conversations
Friday, 21 August 2009
It is called a company voluntary arrangement, not "creditors voluntary agreement". It is NOT approved by court, it is approved by creditors.
I admire Richard and his team for sticking it out and getting through the company voluntary arrangement early.
It seems he had little support from the financial sector, them blamimg the company for being in CVA is pretty rich when much of the financial sector was in the throes of boom and a spectacular bust.
I am supportive of the HMG's plans to increase the number of CVA's by providing the ability for "super secured lending" into CVA companies. Hopefully, the current consultation period will lead to this being introduced, (parliamentary time permitting).
This will allow new lending to be put ahead of the bank and other debts. Thereby helping the new lender to secure its lending.
There are tremendous opportunities in the UK for small banks and finance houses to provide financial products to people like Richard. CVA's are the best insolvency tool in the world in my view.
What it needs is for HMG, the insolvency profession, banks and professional advisors to recognise that a company proposing a CVA is determined to get money back to its creditors. Morally and financially they MUST support the hard working directors who do this (and don't simply run away from the debt). When pre-pack administrations, liquidations and receiverships are rising fast, I say hats off to Richard and his baord of directors who (like many of our clients) are driven to pay back creditors.
Wednesday, 19 August 2009
What does this tell us about the credit problems out there? That there are great strides of progress being made, or that the markets are still locked up?
The news today that Bundesbank is preparing for a second credit crunch in Germany
is even more worrying.