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Tuesday, 30 July 2013

Dunfermline Athletic could exit administration with a CVA

Creditors are to vote on a Company Voluntary Arrangement  at midday at East End Park today, with the owner Gavin Masterton potentially holding a casting vote.  This is because 75% of the creditors by value who attend the meeting or vote by proxy can carry the CVA.

Pars United, the coalition of fans groups that is in line to buy DAFC plc and East End Park Ltd, which owns the stadium, have been working hard to ensure a yes vote. While some creditors may abstain, it is widely thought that to achieve a successful CVA either a full turnout of creditors is required, with the vast majority voting in favour, or Masterton must vote in favour or abstain. The latter is the most likely outcome.

If the CVA is not approved then the club will not be able to meet any of its fixtures and will most likely completely disappear.

Bryan Jackson, of the administrators BDO, told the BBC Sport website. "New sanctions kick in if we haven't got a CVA approved by the end of the month [a 10-point penalty and a £150,000 bond payable to the Scottish Football Association] if we're going into the new season.

"The first problem is that I don't have a way of funding going into the new season. I don't have a plan B. I wouldn't close the club down overnight if it doesn't go through, but I can't really see any great options."

Monday, 29 July 2013

Hearts facing liquidation unless offers improved

Gintaras Adomonis who is the administrator of the Lithuanian bank Ukio Bankas the former owner of Hearts FC has told  BDO, to continue negotiation with fans' group the Foundation of Hearts and Five Stars Football Ltd as none of the offers for the club were acceptable

Ukio Bankas will initiate the process of liquidating Hearts as it has a floating charge over the Tynecastle Stadium as security for lending the company money.  Ukio Bankas holds 29.9% of the shares in Hearts. Kaunas-based investment firm UBIG that has a 50% stake is owed a further £10million by the club. It owns a 50 per cent stake. Both companies were once controlled by former Hearts owner Vladimir Romanov but are now insolvent.

The statement released by Mr Adomonis added: "Hearts administrator BDO received three offers from investors, none of which were acceptable. "Last week the potential investors presented improved offers, however, the main creditor's expectations were still not met. Ukio Bankas approved the administrator's proposal to continue negotiations with the two potential investors. The third investor's - HMFC Limited - offer was rejected."

As such there is a real risk that Hearts could go into liquidation

Friday, 26 July 2013

Greenwoods Communications in administration

Greenwoods Communications has gone into administration following the running up of debts to HMRC.  On Thursday 300 staff were told they would lose their jobs and only 26 remain in order to wind down the company.

The firm, based in Coleshill, was a supplier of infrastructure to the mobile and IT communications businesses.

Warwickshire MP Dan Byles said.

"I had been working with the company at the tail end of last year and early this year in getting HMRC to defer payments and the like,"  "It seemed to be getting OK again and I thought they had turned a corner.
'Very sad' .  Staff will be paid until the end of the month and will receive redundancy payments, he added.

I think it might of been a better idea to get a turnaround firm to try and negotiate with HMRC than the local MP??

In fact Ernst and Young had put the previous company into a pre pack administration in February 2013 and the buyers had bought the £2.98m debt from Lloyds Commercial Finance.  The pre pack had saved 270 jobs at the time but it has transpired that they have lost a major contract with Cable and Wireless that put a strain on cashflow.

At its peak the firm had a turnover of £40m

Thursday, 25 July 2013

What is the winding up order process?

If you or your client has received a threat of, or an actual winding up petition it would be a good idea to know what is likely to happen.  The most important thing of course is to act!

A winding up petition is a serious step to take by a creditor and usually follows if all other methods of collecting the money has failed.

Read our new page on the winding up order process on to find out what happens and what steps can be taken to avoid the winding up of the company

Pension funds no longer treated as preferential creditors in insolvency

A recent court decision has ruled that pension funds are no longer to be treated as preferential creditors in insolvency situations.  In the past the Pensions Regulator used a mechanism known as the "Financial Support Direction" (FSD)

The verdict was the result of a case brought by the administrators of the UK divisions of investment bank Lehman Brothers and Canadian telecoms group Nortel.  This is a very important case as in many cases companies in insolvency have pension fund deficits.  This does not mean that pension holders themselves are in a worse financial situation as the Pension Protection Fund (PPF) will still have to meet any shortfall.  This will mean, of course, more pressure on the PPF.

Nortel, the Canadian firm which collapsed in 2009, had a £2.1bn shortfall in its European scheme. The pension entitlements of more than 40,000 workers were implicated. The funding gap at the UK division of failed investment bank Lehman was far smaller at £148m.

Giles Frampton of R3, the insolvency trade body, said: "The Nortel decision is to be welcomed in that it appears to restore a fair balance between the rights of pension funds and other creditors in administrations."

To read more on pensions in insolvency read our pages.

UK economy expands 0.6%

So all is rosy for UK Plc...  The economy has picked up by 0.6%, which is hardly a stellar performance, but it now means that we have recovered almost 50% of the lost output from the financial crisis of 2007/8

The recovery was across a broad range of sectors with agriculture and production sectors both turning in positive growth, alongside services and construction.

The services sector grew 0.6% which represents a staggering 80% of output so the figures have been helped by this growth.  Manufacturing and construction improved with expansion of 1.5% and 0.9% respectively but both are significantly below their peak in pre recessionary output of 10.2% and 16.5%.

Manufacturing has performed poorly in the recent past due to the crisis hit Eurozone but the recent surge in production in the automative industry is a bright spot.  Any sudden re-emergence of the Eurozone debt crisis will probably blow progress off course so we are not out of the woods yet.

Construction and house building will hopefully be boosted by the increased guarantees from the Government on mortgage lending.

Monday, 22 July 2013

Need help with business debts?

If your business is struggling with debts, despite the upturn in the economy, now would be a good time to tackle them.  Creditors will perhaps be more optimistic about a companies future trading prospects and they may accept a compromise on the debt.

Read our new page on help with business debts

Nichole Farhi bought out of administration

Maxine Hargreaves-Adams, the businesswomen who bought collapsed Fenn Wright Manson from Zolfo Cooper in March 2012 has emerged as the buyer of Nichole Farhi which went into administration on July 3rd.

Nichole Farhi and the founder of French Connection set up the business in 1982 and it operates from 6 stores and has numerous concessions in department stores such as Harvey Nichols, House of Frazer, and Selfridges.

The business suffered like many retailers and  made a loss of £5.6m  on £21.7m turnover in the last available accounts.  The firm employed 75 staff across its retail network, and had another 44 staff employed at its headquarters in London.

Peter Saville, partner at Zolfo Cooper, said the acquisition would mean "preserving a well-known retail brand".

Buying a business out of administration is a risky business. See our page on how to buy an insolvent business but it would appear that Maxine, daughter of the Matalan founder, knows a thing or two about retailing.  Presumably the purchase of Fenn Wright Manson has gone well enough for her to come back for more.

Many retailers are surviving by being bought out of administration or even in a pre pack deal.

Friday, 19 July 2013

KSA Group Insolvency Notices

Tol Contracts Limited - Liquidation Notice

Meeting of the Creditors of the above named company will be held at The Holiday Inn Hotel, M6 Jct 7, Chapel Lane, Great Barr, Birmingham, B43 7BG on 25 July 2013 at 2.45 pm

See full notice below

Allan Business Services Limited - Liquidation Notice

Meeting of the Creditors of the above named company will be held at the offices of KSA Group Ltd, Tower 42, Level 7, 25 Old Broad Street, London, EC2N 1HN on 26 July 2013 at 10.30 am

See the full notice below

Wednesday, 17 July 2013

Winding up petitions by HMRC fall but distraint is up.

HMRC issued 42% fewer winding up petitions in the UK in the financial year 2012/13 to wind up companies than they did in the previous year.  Winding up petitions are now at the lowest figure in five years. In Scotland the number of winding up petitions issued fell by 68%.

Pinsent Masons said that HMRC issued 3,733 petitions for winding up companies in 2012/13, compared to 6,440 in 2011/12.

However the use of distraint by HMRC has increased.  We are increasingly coming across small businesses that have had a visit from the HMRC field officer.  The latest figures available for distraint show a significant increase.  According to Syscap, the finance providers,   HMRC have used distraint to seize business assets – 4,746 times to collect VAT in 2012.  This represents a 98% increase on the 2,401 times it used these powers to recover overdue VAT in 2011.

Serena McAllister, senior associate in restructuring at Pinsent Masons, said “The drop in petitions to wind up companies and place them into liquidation, combined with evidence that suggests HMRC is increasing using its powers to seize business assets, show that HMRC is now using distraint as its preferred method of enforcement.

“This tactic appears to be paying off as HMRC’s recovery rate has increased significantly, which is good news for the taxpayer although not so good news for businesses."

What can you do about distraint?

Effectively if you do not reach a deal or pay in full the field officer or their agents can remove and sell the assets in 5 days. To sell the assets, after they are covered in this way is a criminal offence. If the bailiff has obtained a walking possession he can force entry to recover the goods after the 5 day period.

Threats of distraint or legally taking possession of goods should not be ignored. If you do not agree that you owe the tax demanded, you should tell the HMRC officer, but you will find that he/she is in a non-negotiable position once he/she is on the premises.

It is not too late to rescue the business though as you could agree a time to pay deal or even a CVA.  Call us for details on 0800 9700539

Tuesday, 16 July 2013

Zombie Businesses fall linked to lower insolvency rates

The number of so called "Zombie Businesses" has been declining significantly in the last quarter when compared to the same quarter last year.

According to Red Flag Alert, the research service for Begbies Traynor, levels of ‘critical’ financial distress among UK businesses have fallen 39% compared to Q2 2012.  This is a significant fall in numbers.  The decline from Q1 of this year was 9%.  Interestingly the fall has been seen across all sectors of the economy with food and leisure performing particularly well.

Critical problems by sector:






Bars &  Restaurants223172-23%13517227%
Financial Services8660-30%8460-29%
Food & Bev Manufacturing      

Beverage Manufacturing
Food Retailing6444-31%43442%
General Retail244179-27%1681797%
Ind Transport  Logistics                11565-43%6765-3%
Other Manufacturing246222-10%2082227%
Printing &  Packaging3422-35%2422-8%
Professional Services15864-59%6664-3%
Real Estate326229-30%2272291%
Spors &  Recreation3324-27%3424-29%
Support Services264153-42%169153-9%
Telecoms & IT124102-18%110102-7%
Travel Tourism6032-47%4432-27%
All Sectors4,9473,001-39%3,2833,001-9%

Critical distress is defined by serious delays in processing payments and outstanding legal actions by creditors.  In addition the alert service monitors the general financial health of the companies by monitoring their results posted at Companies House.

The economy has certainly been improving over the last few months which is reflected in these figures. However, still the greatest risk to small companies is the lack of finance.  There are many alternative forms of finance out there that are not attached to the main banks.  See this page on finance for details.

Alternatively if the business is really struggling then a CVA or company voluntary arrangement is often the best solution as a proportion of the debt can be written off.

Monday, 15 July 2013

KSA Group Insolvency Notices

Mansfield Roofing Centre in Liquidation

Meeting of the Creditors of the above named Company will be held at The Lindhurst Rooms, Mansfield Civic Centre, Chesterfield Road, South Mansfield, Nottinghamshire, NG19 7BH on 25 July 2013 at 11.30 am

See the full notice below

Camremovers Limited Formerly Proctor Removals Liquidation Notice 

Meeting of the Creditors of the above named Company will be held at The Hubworking Centre, 5 Wormwood Street, London, EC2M 1RQ on 23 July 2013 at 12.00 pm

See the full notice below

Internacionale in a pre pack administration sale

Internacionale, the budget fashion chain, has been rescued in a pre pack administration sale saving 1,550 jobs and keeping 114 stores open.  Read our news pages to find out more!

Tuesday, 9 July 2013

Are Bank Turnaround Departments Taking Advantage of "Zombies"?

Another great debate looms on the subject of struggling companies being placed into the banks' intensive care departments and then having to accept charges, large fees for external advisors to carry out independent business reviews (IBRs ) and possibly being packaged up for sale against the board's will.

This is highlighted in an article by James Hurley in the Telegraph online today  Last year, James highlighted the issues of asset based lenders charging large exit fees to "knock down" ailing companies through pre-pack administrations and colluding with insolvency firms to so do. Has James uncovered another major issue here is the question therefore?

Well yes and no. Yes because the banks have thousands of sub prime lends to failing companies, how to handle them? How would you handle this?

No, because this is a policy that has been in force since the banks set up recovery departments in the mid 90s. So not a lot new since then really.

What many people may not know is that many of these teams like Global Restructuring Group (RBS) have a mandate to collect fees to cover their risk, take equity stakes in the hoped-for "upside" and charge much higher interest rates/penalties.

One of the people in Hurley's article complained of paying over quarter of a million in such costs. What was not explained was how much debt was involved. The bank would argue why as a stakeholder shouldn't it take costs and equity?

So is James right to highlight this? Yes we think that the banks are at times acting as shadow directors in turnaround situations, for example we are often told by invoice finance houses or bank managers controlling overdrawn bank accounts, that our client may not draw down money legitimately available under their contracted facility to pay anyone - unless they  (the lender that is) agree who it is to be paid to. Is that not acting as a shadow director? It is in our view. Why would a bank manager know who to pay and who not to pay, for mission critical business issues?

Banks insist that their so-called "panel firms" are brought in to advise a board, when often the board has taken independent insolvency advice already. Often this sharply increases fees when it is simply not required. If anything the "panel" is  a closed shop, only select few insolvency advisors are allowed to be on that panel, mainly the largest firms in the industry are allowed.

We argue that this is stifling competition from, smaller more nimble firms with wide expertise in turnaround and insolvency.

If the board and shareholders are taking active turnaround steps and seeking to work with stakeholders like the banks, why impose another raft of costs and impose huge costs in extra management time? Is this the classic "cover your backside" in action?

However, if the board is not acting, then we agree that the banks should be taking active steps to introduce independent advisors.

Your thoughts on this subject would be appreciated?

Monday, 8 July 2013

How to deal with cashflow problems

"We have a cashflow problem, we may not be able to pay  our VAT next quarter and we cannot pay our PAYE debts. I think the company is viable but how do we survive this cashflow problem"?

You need to act properly and quickly firstly!

How to fix cashflow problems is easy when you know how.

How to measure your daily cash in and out? Well click here and download a free excel cashflow that helps your planning.  You should make sure that you up date this every day. For example if you are a retail outlet add the daily takings from your day before into the sales row at the top. Then look at what payments need to go out.  Make sure that you do not offer to pay money that isn't going to be available

Simple but true, you need to monitor cash EVERY DAY. With our easy to use spreadsheet you can see every day exactly where money comes in and where it is going out to.

With 7 trained experts KSA can help you with cashflow, just call for help if you need it,  when you have downloaded your free daily cashflow tool. 0800 9700539 (free on landlines)

How do I tell creditors that we cannot pay them today or next week? Now YOU are armed with your daily cashflow tool, you can see more clearly what can be afforded. Call and always WRITE a letter to those suppliers that you owe money too. Then stick to the offer you make to pay them back over time. Keep a copy of the letter and replies. That way you have registered your contact on their systems. Never ever over promise and ALWAYS keep creditors informed if things change.

This is especially important for HMRC communications.

How to cut business costs? Click here to read tips from our expert in turnarounds - 20 top tips for cost cutting explained - free expert advice that is valuable for your company.

What if we cannot pay VAT or PAYE? Read here how to do time to pay deals with tax collectors. Based on 20 years of dealing with HMRC we have a Time to Pay Tax programme, all YOU need to write a deal with HMRC, letter templates - written for you to complete, timetables, tactics and tips. Buy here only £4.99

How to save the business if cash running out faster than planned? If the business is viable then consider the use of CVA or company voluntary arrangements.  For the world's only free book on how CVAs work click here

Don't struggle on on your own call for expert help. We will reduce stress with one phone call!

Friday, 5 July 2013

Know who you are dealing with when worried about insolvency

There are lots of websites out there that offer advice on insolvency options for businesses.  

It should be remembered that there is less legal protection for businesses than there is for consumers as business owners are expected to be able to make informed decisions.  Unfortunately, when businesses find themselves in distress the directors may make decisions in haste.  

So what do you need to look for when looking for advice?

Who are they?

Perhaps the most important thing is check that you can see exactly who they are.  Some websites do not have any details about who works there and are not an actual company at all.   What they may do is sell your lead onto someone else who may end up charging you more than was originally expected and you know nothing about them.

They approach you direct

There is nothing wrong with this in theory as directors do sometimes need to be persuaded to take action but do bear in mind the points covered before deciding to go with them.

Don't ask enough questions

Every case is different and there are different solutions for different problems.  Some advisers will send you down a particular path such as liquidation or pre pack without knowing enough about the facts and will discount other options out of hand.

Say it won't cost you

Obviously if a company is short of money then promises of help not costing you anything is tempting  i.e the creditors pay?  Be honest and think is this too good to be true??  Err most likely...! Even if they do some work for free it is likely to be of low quality and may well expose you to personal risk. We offer a free examination of the options of course. Also in some cases advisers will say that any payments to creditors and fees should be personally guaranteed.  So if the business fails in its turnaround the adviser gets paid out of personal monies.  Do you want to take that risk?  The incentives for getting a working solution are not there.

How long have they been in business?

Check the company,  if they have one, on companies house or for a proper trading record.   Especially if they claim to have been in business for years.  We have nothing against new start ups as we all have to start somewhere!

Are they licensed? 

This is a crucial point as only licensed insolvency practitioners can do administrations, pre packs and liquidations.  They also need to be the supervisors and nominee of any CVA proposal.  Anyone who claims that you shouldn't go to insolvency practitioners is basically saying don't go to someone who is overseen by a regulatory authority and has to abide with strict rules and etiquette to protect the interests of stakeholders. Instead come to me with no protection or recourse!   Fortunately these claims are less frequent these days.  You can check to see if a firm have insolvency practitioners at  Bear in mind that as long as the firm has insolvency practitioners in it then they can take appointments.  If there are no insolvency practitioners in the business then they will obviously have to pass the enquiry onto to someone else outside!

Do they have examples of their work and or testimonials
This is sometimes difficult to obtain. However, case studies are a good indicator of legitimacy.

Businesses and HMRC Taxes

Businesses do pay large amounts of taxes to HMRC despite the recent headlines about Starbucks and Google.  Yes, large organisations do sometimes manage to keep their corporation tax bills low as they do not post profits every year and one year of heavy losses can be offset against future profits.  In addition they can legally reduce it by other means.  But corporation tax is not the only one they pay.

Businesses pay a wide range of taxes most particularly the following;

  • Corporation Tax
  • Employers National Insurance contributions
  • Value Added Tax
  • Business Rates
  • Company Vehicle Tax
  • Environmental Taxes
  • Capital Gains Tax
  • Insurance Premium Tax

See our pages on HMRC and Tax and learn how HMRC collects them.

Thursday, 4 July 2013

Compliance with Tax and VAT obligations

All seems to be going well in your business, sales and turnover are up, the cash is rolling in from one big client you have won and you can't let paperwork/admin get in the way of more sales....

Unfortunately, there are some bits of paperwork that have to be done by a business. File accounts and annual returns at Companies House, Register for VAT,  Self Assessment for Company Directors, etc etc.

They seem to get in the way of running your business but failure to comply can cause you problems down the line. Your credit rating may suffer, which could be a problem if you want to borrow to fund expansion. But perhaps more importantly it should be an insurance policy if things do take a turn for the worse.

You may find you cant pay vat and paye tax and want to start asking the HMRC for a time to pay or even their support when proposing a company voluntary arrangement

The problem is that HMRC take a dim view of people who come to them for help but who have not complied with the regulations. In the case of CVA's the help we mean is that we are looking for HMRC to support the CVA and as they are often the largest creditor by value their support is critical for the CVA to be approved by the creditors.

We have had some CVA's rejected, not because they offered very low dividends, but because directors had not complied with the tax rules prior to the business' insolvency. Even if these are brought up to date sometimes that is not enough.

So please keep compliance up to date. If you need a good accountant or bookkeeper then give us a call we can put you in touch with good people.

Wednesday, 3 July 2013

Nicole Farhi in administration

Nicole Farhi is reported to be in administration according to reports  Administrators at Zolfo Cooper have been appointed and hope to sell the business.

Nicole Farhi’s administration follows the collapse of Dwell and ModelZone last week.

Nicole Farhi has four  stores in London and is a well known brand in  department stores such as Harvey Nichols, House of Fraser and Selfridges.

Nichole Farhi made a loss of £5.6m  on £21.7m turnover in the last available accounts.

Tuesday, 2 July 2013

Restaurant attempts a CVA - A case study

The company traded as a restaurant and pastry/coffee shop

KSA were appointed to assist the company with the production of  CVA proposals on 11th July 2011
Turnover to 30th June 2010 was £1.2m a £55k increase on previous year

The bank was secured with a debenture (Fixed and Floating charge) and a mortgage.
Owed £53k on £400k overdraft facility
£234k owed on 2 bank loans – original cumulative facility of £310k
£47.5k remaining on 1 EFG loan – original facility of £60k
£3k remaining on 1 SFLGS loan – original facility of £60k

The directors provided personal guarantees and security by way of personal property for any outstanding amounts.

Unsecured creditors

Total debt of £318,771 inc. HMRC at £216,186 (c.68%)
HMRC approved the CVA with standard modifications on 5th December 2011

A CVA creditors meeting was held in London in December 2011.

The actual result was not quite what you would expect?

Read the full case study below

Monday, 1 July 2013

KSA Group Insolvency Notices

N.B.A. Tectonics Limited

Meeting of the Creditors of the above named Company will be held at the offices of KSA Group Limited, Tower 42, Level 7, 25 Old Broad Street, London, EC2N 1HN on 12 July 2013 at 11.30 am.

See the full notice below;

HB Prime Advantage Limited

Meeting of the Creditors of the above named Company will be held the offices of KSA Group Ltd, Tower 42, Level 7, 25 Old Broad Street, London, EC2N 1HN on 11 July 2013 at 10.30 am

See the full notice below;

Administrations show increase in last two months but this is not the whole story

So the economy has been improving and the administration figures are showing a slight increase according to FRP advisory.  However they have only looked at two months of the year and compared it to the first two months.  Ie comparing April and May to February and March.  This is not comparing like with like.   So we need to look at the figures from year to year ie seasonally adjust them.  The number of administrations is still falling year on year with Q1 of 2013 some 29% lower than 2012.  In Scotland the administrations are now down some 73% in April and May when compared to the same period last year.

The Markit/CIPS Manufacturing Purchasing Index (PMI) jumped to 52.5 from an upwardly revised 51.5 in May, data showed on Monday, beating analysts' forecasts for a reading of 51.5.  This is the highest level since May 2011.

All this suggests that the economy is improving which will be a good backdrop for The new incoming Governor of the Bank of England as he looks to boost growth further.

However it should still be remembered that when the economy starts to pick up speed then their is likely to be an increase in insolvencies as weaker companies give way to stronger ones and banks become more partial to reallocating funds.

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