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

Tuesday, 27 July 2010

Portsmouth to discover fate at High Court 3rd August re CVA

We understand that the company voluntary arrangement challenge mounted by HMRC under section 6 Insolvency Act 1986 will be heard on 3rd August in the High Court.

Could be a very interesting day for the club.

We understand the vote of HMRC at the CVA creditors meeting was in relation to the players' image rights and agency fees to offshore companies, therefore not taxable in the Administrator's view. HMRC clearly disagreed.

Company Voluntary Arrangements for LLP's

We were asked by an accountant last week can one of his firm's clients which is a LLP propose a CVA to deal with tax debts.

It appears that the firm in question owes around £400,000 to PAYE and VAT.

The answer we gave was; yes a company voluntary arrangement may be proposed for a LLP.

See our Powerpoint Presentation on a CVA for a LLP here on Linkedin

Monday, 26 July 2010

Miss Sixty and the "Powerhouse" Principle

In our eNews of last week (email me if you wish to receive this monthly newsletter)
regarding the Miss Sixty UK Ltd - CVA . See a copy below in italics

"Another section 6 application this time not by HMRC but by a disgruntled landlord, called Mourant & Co Trustees.

The s6 application is a bid to have the decision of creditors approving the CVA revoked, because the parental guarantor was unfairly prejudiced against.

Mourant owns the Liverpool shopping Centre known as the Metquarter, where Miss Sixty and sister brand Energie had stores which were both were on 10-year leases. Crucially each lease was in turn guaranteed by Miss Sixty UK's Italian parent company, Sixty SPA.

However, under the CVA proposed by Sixty UK to determine the shop leases, the landlord also lost the parental guarantee. Had the company gone into liquidation, the guarantor's obligations under the lease, ie to pay the rent and charges would have continued. The CVA, however, allowed Sixty SPA to walk away.


Similar to the Powerhouse case the court is likely to find that the CVA was not able to unilaterally determine another contract i.e. the parental guarantee, without bilateral concurrence. Watch this case!

Our views on CVA’s are well known - always ensure that there is concurrence and consensus as much as possible.

So, whilst Powerhouse indicates that a parental guarantee cannot be determined by a subsidiary CVA and the Miss Sixty case may vindicate the Powerhouse decision, this determination of a parental guarantee using the CVA as a tool is still possible if done with consensus and an appropriate payment to the landlord by the guarantor."


Well it seems I was right on both issues; the court DID find for the plaintiff and the CVA was rejected because it was unfairly prejudicial against the landlords. Interestingly though, the judge
stated that the compromise of a landlord's claim against the guarantor of a tenant debtor - also known as the Powerhouse principle - IS a valid legal mechanism within a CVA, as long as the compromise is not unfairly prejudicial.

In a judgement that was critical of the nominees and supervisors of the Miss Sixty CVA, Peter Hollis and Nick O'Reilly, then of Vantis PLC, who proposed a CVA as administrators of Sixty UK Limited, Justice Henderson found that a landlord could have been crammed down in this way, but was in fact unfairly prejudiced (Mourant & Co Limited Trustees and another v Sixty UK Limited (in administration) and others). The CVA was set aside.

The judgement concludes:

"I am conscious, of course, that I have not heard the administrators' side of the story, because of their decision not to participate in the trial. Nevertheless, I am satisfied that there is a prima facie case of misconduct on their part which ought to be considered by the professional bodies to which they are answerable. I therefore propose to direct that copies of my judgment should be sent to the appropriate bodies by which they are licensed to act as insolvency practitioners."

This is something that the IP's regulator will have to consider carefully.

However, the main point for landlords is that the case yet again underlines that CVA's are an enormously powerful tool that can compromise a lease and indeed, if properly prepared, may compromise personal and parental guarantees.

Friday, 23 July 2010

Sheffield Wednesday: WAS NOT SERVED a winding up "order"

Wednesday were served a winding up PETITION!

Big difference:

The winding up order is made by court at a winding up HEARING if the creditor is not paid and the company cannot agree a deal.

A winding up petition is served on the company to start the winding up process. There's usually around 60 days between the date of service and the hearing.

So come on you BBC journalists and indeed the club get it right please??

Sheffield Wednesday was NOT SERVED A WINDING UP ORDER!

For a full description of the process see this page.

Thursday, 22 July 2010

Halliwells LLP carved up in pre-pack administration

Halliwells the north west law firm was broken up in a pre-pack administration process this week. The pre-pack process was used to sell its assets to Hill Dickinson, HBJ Gateley Wareing and Barlow Lyde & Gilbert.

A property deal which saw Halliwells' equity partners share around £17m, was not the sole reason for the law firm's demise, joint administrator Dermot Power of BDO Manchester has said.

This is one of the first large failures of an LLP law firm, it owed around £17m to RBS. See here for a case study for a company voluntary arrangement for a south east based law firm

Wednesday, 21 July 2010

KSA Experts Guide to Creditors Voluntary Liquidation

Excusively available today through our CompanyRescue Blog page we are proud to announce the launch of our:


Experts Complete Guide to Creditors Voluntary Liquidation



With over 50 pages of content, this is the ONLY expert guide to liquidation available free of charge on the internet.


Although its far from a comprehensive technical guide, it is aimed at giving worried directors and their advisors everything they need to know about the voluntary liquidation process.

Want to know what liquidation means for directors? What is wrongful trading? What is a preference? Want to know how to deal with overdrawn directors current accounts in liquidation and lot's more?

Want to know how liquidation works? Get our FREE and SAFE to DOWNLOAD 50 page PDF here. Just two clicks!

Dickinson Dees Law Firm Sees A Profits Rise

Dicky Dees, as we call it here at KSA, had a better year in 2009-10 despite fee income falling 5% to £48m.

Jonathan Blair managing partner reported an 18% rise in profits to £13m.

Tuesday, 20 July 2010

What will happen to the HMRC time to pay debt of £5bn+?

Accountancy Age reports that the ICAEW is to write to the government and ask what will happen to the debts built up under the Time to Pay scheme (TTP) introduced by HMRC late 2008.

In another story last month Accountancy Age described how the scheme was being abused, according to Andy Wood of R3 Yorkshire. In his opinion HMRC will be lucky to collect 75% of the arrears built up in the Time to Pay scheme.

We see TTP as a powerful tool to help short term cash flow problems, but if some companies are becoming reliant on this as unofficial "life support" and cannot function without a new deal every few months, then it is being abused and the company is likely to face aggressive action by the tax creditors.

The message we would give directors is: get costs down, put staff on short time working, drive marketing (and hopefully sales) manage costs / cashflow daily and focus on a recovery programme. Yes use TTP where necessary to survive a short term cashflow hole but do not build this in to your business plan as a permanent long term solution.

If this informal turnaround approach does not work and HMRC withdraws TTP support, then consider using a company voluntary arrangement to restructure the company.

Friday, 16 July 2010

Portsmouth City : CVA suffers section 6 application by HMRC

The sorry tale of the company voluntary arrangement for Portsmouth City continues.

Further to my blog of 17th June (Portsmouth CVA approved but only just ) the HMRC chaps have mounted a section 6 Insolvency Act 1986 appeal against the CVA. As we said the HMRC vote was allowed at £37m at the creditors meeting the CVA would have been rejected. If the court finds that there was a material irregularity at the meeting, then the Court may order a new creditors meeting or any order it sees fit.

So the administration continues and there will be a hearing in due course. Indeed the club's administrator Andrew Andronikou, who had been anticipating HMRC's appeal, warned the case may not be heard until October or November.

HMRC has argued that £13m of debt was left out of the original calculations; if the £13m figure is included, says the HMRC, it would then have more than the 25% of the debt it needed to block the CVA.

"We are acting in the interests of all those creditors who are not in the football industry. We don't think it's right that they are offered 20p in the pound against full repayment all others," an HMRC spokesman told BBC Sport.

"HMRC feel we have been or will be unfairly prejudiced by the decision to accept the CVA, because we believe there were material irregularities in the way in which the votes of creditors were counted at the creditor meeting and because, to our knowledge, the full amount of our claim should have been admitted for voting purposes.

"Also we cannot agree with the striking out of £13m of debt which seriously undermined our ability to challenge the CVA."

CVA Flowchart

I once met an engineer who said "your website is full of lots of words, can't you give us some diagrams or pictures Keith"?

At this page here you will find a range of flowcharts that set out step by step guides to each insolvency process.

Specifically this blog is about the company voluntary arrangement flowchart here
http://www.companyrescue.co.uk/company-rescue/options/cva-flowchart

Feel free to use this as often as you like and pass to your clients or colleagues.

Thursday, 15 July 2010

Unemployment or part time employment? 27% now on part time

For many the recession continues. Over a quarter of all those in work are working part time.

The Times reports on the KPMG manager who is still on a 4 day week. More thna a third of the 11,000 KPMG UK employees are on part time.

Over 7.8m people are working part time.

Tuesday, 13 July 2010

Frazer and Frazer Ltd - Insolvency and Turnaround Licensors

We note from Creditsafe, Companies House, the London Gazette and Stubbs Gazette that Frazer and Frazer Ltd has received 3 County Court Judgments. In addition a Winding Up Petition dated 27th May 2010 was listed at Companies House on 7th July.


The petitioner is Yell Ltd t/a Yell the winding up hearing date is 2nd August 2010 in the Birmingham District Registry.


As a result of this information being made public in the Gazettes and Companies House, one questions whether the business can continue. Frazer and Frazer sells licences to business people (from £10-20,000) for a geographical area for the licensee to subsequently offer personal debt solutions and and company debt solutions to worried directors.

After the failure of Vantis plc, worried directors should be careful who they ask for advice in this strange recession. Any worried Frazer and Frazer licensees or clients can speak confidentially with Keith Steven of KSA Group Ltd now on 07974 086779.

Business For Sale by Joint Administrators, Eric Walls and Wayne Harrison

On instructions of E Walls Esq & W Harrison Esq, of KSA Group Ltd, the appointed Joint Administrators:



Short Notice Sale Opportunity - Business for Sale




By way of a sale of the assets

Specialist business to business magazine publishing company


Located in South East England

Click here for more details

Monday, 12 July 2010

Davenhams latest factoring company to close

It seems that Davenhams has decided to close for business according to my old pal Ian Johnston at the "Factoring Blog" and the FT

http://www.ft.com/cms/s/0/a897de10-8448-11df-b9f8-00144feabdc0.html

It is apparent that all is not well in the SME factoring sector

R3: "Bad management to blame for 56% of corporate insolvency"

After a survey of R3 members (R3 is the insolvency practitioners trade body) President Steven Law commented:

“Regardless of the economic circumstance, no business will survive with poor management in place. I have seen a good workforce let down and sometimes laid off due to management which does not admit and correct their mistakes.”

The survey showed that R3 members believe there are some lessons that can be learned from the experience as 74% of insolvency practitioners believe corporate failure can drive directors to be more successful.

Steven Law concluded: “For some directors, the experience of failure can clearly drive them onto greater successes, but I would share concerns that the current regime is, if anything, too forgiving to directors who have failed. Clearly it would not be practical to educate every director before they are appointed, but there must be enough checks and balances to ensure that directors of failed companies should not put creditors and jobs at risk if they are allowed to repeat their mistakes."

In the US of course, the adage that you cannot be a success until you have had a company fail, seems to encourage a much greater understanding of company turnaround options.

Hopefully, the current difficult economic times will help educate business people that keeping costs under control, marketing their services or products, learning from mistakes is essential for business survival. HOWEVER, the biggest failing of management that we see is the failure to act soon enough when the business is distressed.

Friday, 9 July 2010

KSA Liquidation Notice North East Installation Services Limited

KSA Liquidation Notice July 2010


http://www.companyrescue.co.uk/insolvency-notices/north-east-installation-services-limited-liquidation-notice

What happens to employees made redundant through insolvency?

The unfortunate side effect of administrations, liquidation and other forms of company insolvency is that often employees are made redundant.

I have to admit that most people in the insolvency profession are not very good at explaining to employees what their rights are, what options they have and what to do make claims for redundancy and lieu of notice.

Many people turn to the Internet for help. Our dedicated web guide here http://www.companyrescue.co.uk/company-rescue/guides/redundant-employee is designed to help those people worried about impending insolvency, directors who need to explain to their people what will happen in insolvency and those made redundant by administrators, liquidators or through a company voluntary arrangement.

We are always happy to answer any questions on these matters on 0800 9700539.

Thursday, 8 July 2010

Is imitation the sincerest form of flattery?

For once this blog will be used to comment on someone trying to follow my shirt tails and use techniques and brand names that we have used successfully over 10 years.

Look at this URL (web adddress) http://www.companyrescue1.blogspot.com/ What does that remind you of?

Well it is NOT THIS BLOG.

An insolvency lawyer from Newcastle has decided to copy the name of our blog, add a numeral "1" and then use that name to further his own marketing aims. I will leave it up to the reader of my blog and our web marketing content to make up their own minds as to whether this is smart or not.

Wednesday, 7 July 2010

Need time to pay VAT or PAYE?

We recommend that you visit the Business Payment Support Service website here

http://www.hmrc.gov.uk/pbr2008/business-payment.htm

The BPSS will consider all offers of time to pay PAYE or VAT;

Here is the introduction :

"If you're worried about being able to meet tax, National Insurance, VAT or other payments owed to HM Revenue & Customs (HMRC), or you anticipate that you can’t afford to make payments becoming due, you can call our Business Payment Support Line below seven days a week.

Our staff will review your circumstances and discuss temporary options tailored to your business needs, such as arranging for you to make payments over a longer period. We will not charge additional late payment surcharges on payments included in the arrangement, although interest will continue to be payable on those taxes where it applies.

At the Budget 2009, the Chancellor announced an extension to the service. If your business is unable to enter into a reasonable payment arrangement to pay previous years’ profits we can take into account losses that you are making in the current year. If your business is still viable, and we agree your estimate of the loss, you can have the anticipated loss taken into account when we consider your situation."

If you have had a time to pay deal (TTP) in the past they will still consider you for another TTP.

But what if the BPSS does not accept a TTP that you can afford and asks for faster repayment? Then we would suggest contacting KSA or a similar advisor to see if they can get a suitable TTP in place. This would require some work on a statement of affairs and a financial forecast. It is possible that this may be acceptable to HMRC as some external professional advice has shown that the business is viable and can afford to repay the debts over a comfortable period.

If the company is still viable but HMRC doesn't accept any TTP offers then a company voluntary arrangement (CVA) is the best option. Although a formal insolvency tool it is a powerful way to restructure the business, the debts and buy a breathing space to recover from the cashflow shock.

Visit this page http://www.companyrescue.co.uk/company-rescue/options/detailed-cva

Tuesday, 6 July 2010

Small Business Inflation Rises

Daily Telegraph reports a sharp rise in small business inflation according to More Than Business and Warwick Business School survey which uses a basket of 20 key expenditure items for small businesses to monitor changes.

The biggest first quarter increases were concentrated in three areas. Vehicle and maintenance costs and tax was up 7.53pc while fuel costs rose 6.3pc and office equipment and furniture 5.8pc.

Manufacturing has been hardest hit with a quarterly increase of 2.9pc and an annual rate now running at a staggering 7.6pc. Regionally northern and southern England sustained the biggest rise of 2.8pc in the quarter compared with 2.4pc in Scotland.

Mike Bowman, head of More Than Business, part of the RSA group, said that with revised forecasts pointing to slower growth the latest cost increases will test small business cash reserves even further.

Friday, 2 July 2010

CVA Case Study Restructure of a leveraged Buy Out

KSA was invited to review this marketing and print management company with circa £8.9m of sales.

"We have a failing company whose investors have invested £1m, plus £7m of loans and loan notes. HMRC is threatening to wind up the company for unpaid VAT and PAYE".

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.


Read the case study here

Zombie Recruitment Firms cannot pay their debts

An increasing number of UK recruiters are now ‘zombie’ companies, according to Plimsoll Industry Analysis's latest report on the recruitment sector of 1,000 companies.

The analysis found 37 ‘zombie’ companies which have seen their performance deteriorate to such as extent that they now exist merely to pay off their debts and survive.

Some have debts of 96% of turnover. These are possibly candidates for a company voluntary arrangement solution.

Many will have high levels of secured debt that the banks are simply rolling over. Perhaps it is time for some of these debts to be written down as part of a formal restructure process.

Thursday, 1 July 2010

Vantis in Pre-Pack Administration

The news that Vantis entered Administration was not a suprise yesterday.

I am sure many shareholders will be bitter about their loss - the company was valued at £110m at it's peak.

A number of buy outs seem to have been arranged by FTI before the administration, this pre-pack method will upset many creditors too. RSM Tenon pick up a major part for £4m rising to £6.8m we understand. Other members of the insolvency team at Vantis have bought themselves out of the mess.

We wonder how they will get new work, as their failure as Vantis hardly engenders confidence? Would Barclays, as the Vantis lead bank, give them any work?

Aston Rothbury Factors goes bust

Another small factoring company fails: how many more are teetering on the brink I wonder?
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