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Tuesday, 29 April 2014

Two new CVA case studies

This first case study had a CVA approved with the help of a very understanding landlord who agreed to the surrender of the lease straight away.

The second case study shows how difficult it can be sometimes to get a CVA approved by HMRC. We managed to eventually get it approved, however it came with strict provisos which the director could not adhere to.

Liquidations on the rise in 2014

Latest statistics from the Insolvency Service show compulsory liquidations increased by 53.1% in the first quarter of 2014 compared to the third quarter of 2013 (a total of 1,072 down to 700). However, these figures could be seen as misleading as they represent the quietest period of the year compared to one of the busiest quarters from January to March.

The fact that compulsory liquidations are on the rise suggests HMRC and trade creditors are getting tougher on insolvent businesses. Interestingly, the number of Creditors Voluntary Liquidations (CVLs) fell by 7.1% since the previous quarter, but compared to Q1 last year, statistics show they have increased by 2.9%.

Looking at all other insolvencies (which includes administrations, receiverships and CVAs), there has been a reported fall of 2.8% on the same quarter last year. The number of administrations has slightly increased but CVAs have stayed at the same rate. The most noticeable change is the rise in liquidations.

In the 12 months leading to the end of the first quarter of 2014, the highest number of company liquidations occurred in the construction industry, followed by retail and wholesale sectors.

A reason for the rise in liquidations could be due to the slump in sales at the start of the year as well as perhaps poor sales results after the festive period.

Overall, including the compulsory liquidations statistics, UK corporate insolvency volume have risen year on year by around 3.3% versus 2013. So much more modest than the headline but still higher than a year ago.

Construction group, Mike Stacey Limited, is in administration

UPDATE - 14th May 2014: West Country Guns has been bought out of administration by Shaun Stacey and will trade under the name West Country Guns.  

Trading as Stacey Construction and West Country Guns, the 47 year old group fell into administration on Thursday (24th April) due to cashflow problems.

Specialising in the construction of petrol stations, the Somerset-based company appointed joint administrators, Simon Thomas and Nicholas O’Reilly of Moorfields Corporate Recovery. The company ceased to trade last week, leading to 60 redundancies.

Administrators are currently seeking a buyer for the West Country Guns division, a retailer of new and used guns.

Joint administrator, O’Reilly, commented, “The former director [Shaun Stacey] has stated that he hopes to buy part of the business to continue the specialism in building petrol and service stations. We will be in discussions with him and any other interested parties about selling this division to raise further cash for creditors.” Mike Stacey, his father, owns 51% of the business, while Shaun owns 49%.

Turnover for the 12-month period ending July 2012 was £9.8million, down from £16.9million the year before. It’s believed the drop was due to large contracts finishing over the year.

We are not involved in the administration and questions should be directed to Moorfields who are handling the administration.

If you are an employee of the business, please listen to the video below as it will tell you your rights as an employee of an insolvent business.  There is a link at the end of the video to the Government website which expands further on what you need to know.

Friday, 25 April 2014

The Gherkin goes into receivership

The famous London landmark (built in 2004) is likely to be auctioned off as the building was placed into receivership earlier this week.

The skyscraper, formerly known as 30 St Mary's Axe, is co-owned by the German company, IVG Immobilien, which became insolvent last year. During the recession, debt began to pile up due to high interest rates and changing currency value against the pound. Phil Bowers and Neville Khan of Deloitte were appointed receivers on Thursday by IVG's creditors to assist with the sale of the iconic building.

With the recovering market, it's believed a sale will take place within the next few months. The private equity firm co-owner, Evans Randall, had wanted to own more of the skyscraper but had been unable to agree a suitable solution with IVG due to the complex circumstances. Possible buyers now include, Ping An, a Chinese insurance company.

Joint Receiver, Neville Khan, stated, "The senior lenders were reluctant to appoint a Receiver but felt they had no choice due to the ongoing defaults, which have remained uncured for over five years, and concerns that the borrowers’ lack of equity in the transaction had caused their incentives to become misaligned with the Lender".

"The Gherkin is a truly exceptional building, a landmark recognised around the globe. Our priority is to preserve the value of this asset".

"We are in the process of communicating with all tenants and working with the property manager to ensure the continuation of all property management services with no interruption to tenants."

The Gherkin was placed into receivership (relating to the Law of Property Act) which is the equivalent of having the building repossessed by its creditors, as IVG could no longer keep its stake of the building.

Wednesday, 23 April 2014

Planned tube strikes

With tube strikes set to go ahead over the next two weeks (5 days of strikes in total), businesses in and around London could be pushed to the edge - so act now if you think your business might be in trouble.

Hopefully, the strikes will be called off before they can cause disruption but if not, talk to us if you need advice on cashflow and rescue options.

Take our insolvency test if you're worried your business is insolvent:

Don't wait until you're already in debt and creditors are threatening legal actions - if you're worried, act now!

Tuesday, 22 April 2014

Half of SMEs have problems with cashflow

According to Bibby Financial Services’ (BFS) most recent report, Livelihood businesses in the UK, half of the smallest businesses in the UK (with fewer than nine employees) have struggled with cashflow and bad debt over the last year.

Chief Executive, David Postings, of BFS commented, “Already this year, we have seen signs of economic recovery but it’s imperative that small businesses review their sources of finance so that they have working capital to help fulfil orders and continue to pay staff”.

Reduced supplier payment terms, falling margins and ‘bad debt’ are the top three issues faced by SMEs.

Controlling cashflow is vitally important for any business so it’s useful to have a daily template which ensures you know exactly what goes in and out of the company. That, together with cost-cutting and managing debtor collection, can help improve your company’s cashflow. Read our page on company cashflow problems for more tips and advice as well as a free cashflow template.

Thursday, 17 April 2014

Happy Easter!

The KSA team would like to wish everyone a happy Easter and a relaxing long weekend!

Wednesday, 16 April 2014

Albemarle & Bond bought out of administration

The UK pawnbroker has been bought by former Chief Executive of the Bank of Scotland, Sir Peter Burt, as part of an investment group, led by Promethean Investments.

PwC have been handling the administration of the PLC since the end of March, when lenders could no longer back the business and the pawnbroker admitted it couldn't pay the £51 million debt owed.

Over 600 jobs have been rescued with the take over of 128 branches. The remaining 59 stores will likely close, leaving 181 jobs at risk. However it has been suggested staff will be transferred to the other stores.

Joint administrator, Mike Jarvis, commented "The deal announced today was the best offer received, preserving the most jobs and keeping the most stores open. All 120,000 pledged items remain safe and available for the customers to redeem".

Overall, good news for Albemarle & Bond. With the recent struggle and fall in gold prices, perhaps it's best they now refocus on pawnbroking and steer clear of buying and selling gold.

Tuesday, 15 April 2014

Inflation rate falls to 1.6%, lowest since 2009

According to the Office of National Statistics, the inflation rate (measured by the Consumer Price Index) fell from 1.7% in February to 1.6% in March, still well below the government's target of 2%. It's the lowest rate since 2009 and has been falling consistently over the last few months.

The Retail Price Index (RPI) fell from 2.7% to 2.5% due to the 'smaller rise' in clothing prices. The gap between wages and prices is continuing to narrow, indicating consumer power is coming back, which can only be a good thing for retailers. Will the fall in inflation continue?

Monday, 14 April 2014

West Cornwall Pasty Co in pre-pack deal

Pie seller, West Cornwall Pasty Co, entered administration on Friday 11th April and was shortly afterwards sold in a pre-pack deal by private equity firm, Enact - saving 274 jobs. Read more in our news piece below:

If you are an employee of the company, direct your queries to PwC, who are handling the pre-pack administration. For employees rights' in insolvency, check out our video below:

Friday, 11 April 2014

What are Fixed and Floating Charges?

When a company borrows money, the lender (e.g. bank) usually takes some “security” for that debt as they want to be protected in case the borrower fails to repay debt in the future. If this happens, two types of charges, fixed and floating, can protect the lender.

What is a fixed charge?

The bank may have lent money to the company to acquire an asset like a building or vehicle, for example. The company cannot sell this without the lender’s permission and the debt must be repaid as agreed to in the loan agreement or facility letter.

Like a mortgage, you cannot sell the house without the lender's permission and debt must be repaid in full before you can own your home. This is a type of fixed charge.

A company’s debtor book (including factoring or invoice discounting) can also be a fixed charge. If the bank or factoring company has bought outstanding invoices and lends money against them, then these book debts belong to the lender, not the company.

What is floating charge? 

Where a lender cannot get security in the form of a fixed charge, it will usually take a floating charge against the company’s remaining assets. For example:

Work in progress
Unfactored debtors
Fixtures and fittings
Vehicles or assets not subject to fixed charges

It would not be practical to put a fixed charge over every item of stock or desks and chairs so these are left to floating charges.

Read more in our guide to debentures and examples of fixed and floating charges

Thursday, 10 April 2014

A guide to debt collecting

"My debtors are slow, or won't pay me, how do I improve debtor collection"?
This is a common question from our callers. Follow some of our tips below to help improve collecting payments.

Dealing with late payment

1.Introduce a strict policy for debtor collection built around specific target dates.

2.Assertively collect debts – it is your working capital

3.Take references up on new customers – most do not. We are amazed at how many businesses fail to ask for references, how many fail to read and act upon any they get and how lax credit limit enforcement is when faced with "iffy" references.

4.Buy a subscription to a credit reference agency early warning system. This is particularly important if you regularly open new accounts and or large accounts. It is so cheap to do and can save you, literally, thousands of pounds.

5.Refuse to supply even if a "good " customer is over limits, call them and ask what the problem is. Do they have the invoice, delivery note and are they satisfied? If yes ask for your money. If they still don’t pay consider issuing:

5.1. Final warning letter - you will commence action if you do not hear within 7 days - this helps establish that the debtor accepts the debt.

5.2. Obtain a County Court Summons form from your local court; issue a copy of it with all details correctly filled in. (We are amazed at how many people go to the bother of issuing half filled out forms!)

5.3. Tell the debtor you will issue the summons in 5 working days unless they pay. If this fails:

5.4. Issue the summons to the court. After judgment is granted call the debtor for the money. If this fails:

5.5. Proceed with a warrant of execution - basically an instruction to the court to collect the money (they send a bailiff to do this). If this fails:

5.6. Consider a winding up petition if the debtor is a company or a bankruptcy petition if the debtor is a sole trader or individual.

5.7. Up to the last step above this is a relatively inexpensive way of debt collecting

6.Build a collection system, use "Sage" or other accounts package or use a manual system with trigger dates for every invoice.

7.Charge interest – its your money.

8.Go to the customer's premises and demand to meet the owner, MD or finance director. Say you will not leave until the company gives you a cheque, even if its post dated.

Remember a good customer who does not pay is not a good customer long term!

Tuesday, 8 April 2014

Paul Simon administration: 17 stores to close

The home furnishings retailer which went into administration last week will have to close 17 stores, say administrators from Deloitte.

The company which specialises in carpets, curtains and furniture and has 51 stores, mainly in the South and South East, called in administrators last week after the impact of the recent floods led to decline in sales and cashflow problems. Together with this and already difficult economic conditions, the retailer felt administration was the best way to safe-guard the business while restructuring plans were prepared.

Lee Manning and Nick Edwards were appointed joint administrators on the 2nd April and have since come to the decision to close 17 loss-making stores in the next three weeks to encourage a sale for all or parts of the business as a going concern.

The following stores will be closing:
  • Aylesbury
  • Banbury
  • Bedford
  • Bournemouth
  • Daventry
  • Dunstable
  • Gillingham
  • Great Yarmouth
  • Luton
  • Margate
  • Portsmouth
  • Reading
  • Sittingbourne,
  • Strood
  • Wimbledon
  • Worcester
  • Worthing
If you are an employee of the retailer and you're concerned about the future, please have a look at our video on employee rights in insolvency. Contact Deloitte who are handling the administration if you have any specific questions

Monday, 7 April 2014

Employment Allowance is open for business

From yesterday (6th April 2014), around 1.25 million businesses and charities will now be able to benefit from Employment Allowance. Employers can reduce National Insurance contributions (NIC) by up to £2000, paying less or in deed nothing to HMRC for their employees.

If you pay less that £2000 every year in NIC, you will no longer need to pay anything.  It’s estimated around 450,000 businesses can now stop making payments.

Any businesses, charities and amateur sports clubs that pay class 1 National Insurance contributions are eligible – use the government’s handy calculator to check how the allowance affects your business. Note that public authorities cannot claim. Furthermore, if you are in a group of companies, only one company is entitled to the allowance.

You can use your current payroll software to claim.

This is great news for small businesses and is a welcoming approach from the government to help alleviate financial struggle.

Friday, 4 April 2014

What’s happening to our high street?

Recent figures from Deloitte show one in five shops stand vacant after a number of large retailers have fallen into administration over the last five years.

However the high street is in fact performing better than retail parks and shopping centres when it comes to occupying vacant premises. Retail parks account for 37% of vacancy rates compared to the high street’s 20%.

Since 2009, 27 large retailers have entered administration, like Blockbuster and HMV, with some going bust and others closing down many of its stores and downsizing. According to research from the Local Data Company, more than 4000 shops have been left empty. Furthermore they believe there are, in total, around 43,600 shops currently vacant.

With the high street outperforming less central locations, there is noticeably a shift in the high street landscape, with many traditional shops being swapped for budget retailers and entertainment outlets, including restaurants and cafes. Deloitte revealed Poundland and other discount retailers are taking one in five vacant properties.

The ‘click and collect’ style of shopping is bringing shoppers back from online retailers to the high street as it more convenient for the busy customer who won’t often be around at home to sign for deliveries. The idea of picking up orders on the way to and from places like work is very appealing as consumers get what they want on their own schedule, not the postman’s!

There is still a long way to go to tackle the number of vacancies but evidence suggests the high street is coming back with cities and towns set to look a lot livelier in the future.

Tuesday, 1 April 2014

Christmas shop director disqualified for seven years

Director of all-year round festive shop, Hartes Christmas Shop, has been banned for seven years due to poor-record keeping.

Leo Jones ran up debts of £290,000 was unable to provide the required records to administrators when the Blackpool-based company went into administration in February 2010. It was revealed records of sales could not be found nor could receipts showing the value of stock.

Not only did Jones fail to provide the right documents, the court found he transferred funds from the insolvent company to his other companies instead of paying creditors.

This would fall under the Preference insolvency Act. This is where a company pays back more debt to one creditor over the other, often deliberately doing this to make their ‘chosen’ company or creditor better off. In this particular case, he paid money to his other companies (solely to benefit him) rather than paying back what he owed to creditors in the appropriate ways.

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