Is your business one of the many just hanging on?

The newly-published insolvency figures for Q3 (July to September) show a massive increase in the number of businesses entering Administrations.

A mid-October report by Begbies Traynor reported that the number of British businesses in significant financial distress has risen by 40% since the Brexit vote – with those in the property, construction, retail and the travel sectors the hardest hit and 489,000 companies in significant distress up by 22,000 on this time last year.

This was followed by KPMG’s recent analysis of London Gazette notices of companies entering into Administration and the picture became clearer with yesterday’s statistics from the Insolvency Service.

Administrations increased by 20% in the last quarter, compared to the previous quarter, to reach their highest level since Q1 2014. CVLs (Company Voluntary Liquidations) rose by only 2.3% compared to the previous quarter but were still at their highest quarterly level since Q1 2012.

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Proposed HMRC preferential status a blow to financing and restructuring

The Government last week published its new draft Finance Bill, which includes the proposal to restore HMRC preferential status as a creditor for distribution in insolvency. This was originally granted in the Insolvency Act 1986 but removed by the Enterprise Act 2002.

In summary, HMRC is currently an unsecured creditor ranking equally with suppliers as trade creditors and unsecured lenders for any pay-out to creditors from an insolvent company. The preference would mean they get paid ahead of unsecured creditors leaving less or nothing for most creditors whose support is necessary when restructuring a company.

There had already been considerable consternation expressed by insolvency practitioners and investors after Chancellor Philip Hammond announced the proposal in the Spring, but it seems the Government has decided to press on making only a light amendment to the effect that preferential status will not apply to insolvency proceedings commenced before 6 April 2020.

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UK business rescue culture isn’t working and new proposals won’t work

Since the Cork Report in 1982 that led to the Insolvency Act 1986 (IA86) there have been a number of initiatives that have led to legislation aimed at promoting a rescue culture in UK.

The shift was from a penal approach to insolvency one based on a belief that saving insolvent companies by restructuring offers a better outcome for all concerned than the alternative of simply closing them down.

This can be achieved by putting the company into Administration, where an IP (Insolvency Practitioner) takes over the running of the company, including negotiating with creditors with the aim of saving the company or at least saving the business by selling it to new owners. In addition to benefitting secured creditors Administration also helps save jobs.

The alternative is a CVA (Company Voluntary Arrangement) where the directors effectively reach agreement with creditors for revised payment terms such as “time to pay” and sometimes for a write down of the debt as a condition...

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What’s ahead for the retail sector in 2019? – February sector focus

administration retail Feb 07, 2019

It has been obvious for some time that the High Street is undergoing massive changes as online shopping gains a growing share of the retail pie.

Not a week goes by without another announcement of a “big name” closure or restructure and the New Year has been no different after mediocre Christmas sales with Hardy Amies and HMV falling into administration for a second time, Patisserie Valerie and Odd Bins filing for insolvency and Marks & Spencer announcing further store closures as part of its ongoing restructuring.

The figures make gloomy reading.

Deloitte says it has been instructed by more than 20 struggling high street chains in the past two months to assess whether they are eligible for restructuring their debts and lease obligations, according to the Sunday Times.

Towards the end of January the Guardian carried out a survey of the decimation that has beset High Streets in 88 major town centres in England and Wales and found that they have lost 8% of their shops...

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