Directors should be mindful of future investment and changing values post pandemic

Businesses planning their post-pandemic strategy are likely to be seeking future investment to shore up their balance sheets but directors will need to be mindful of the changing values of stakeholders and in particular those of their customers who in turn are influencing investors.

Before the immense disruption caused globally by the onset of the pandemic, climate change, global warming and the need for a more sustainable form of economics were a major preoccupation.

That preoccupation has not gone away.

While physical attendance at a second summit on ethical finance by international delegates from Government officials, financial institutions, consumer goods corporations, supply chain intermediaries and conservation organisations planned for Edinburgh this month has had to be cancelled, it has now been replaced by a virtual summit.

And this month, the UK’s Investors Association published a paper on the future of investment in which it, too, identified the importance going...

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‘Caveat Emptor’ Is peer to peer lending too risky for peers?

Peer to peer lending (P2P) enables individuals to obtain loans directly from other individuals, cutting out the financial institution as the middleman.

As such, the lack of trust in middlemen has seen the emergence of peer to peer lending platforms as an attractive proposition for retail investors in a climate of low interest rates because they can offer better rates thanks to the lower overheads associated with online businesses. The lower overheads are also related to not having to pay a middleman!

The platforms are generally a website or app that facilitates this alternate method of financing, where the first emerged in 2005 and was brought under FCA (Financial Conduct Authority) regulation in 2014.

However, the FCA has been criticised as being too “light touch” in its oversight following the collapse in May this year of UK property finance peer to peer firm Lendy with £160m in outstanding loans of which it has been calculated more than £90m are in...

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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.

The...

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Price and environmental pressures in the cargo shipping sector – stormy waters ahead?

In early April a national newspaper published a report on the captain and crew of a cargo ship who had been stranded in the Persian Gulf off the UAE for 18 months without pay or food.

The cargo ship, said the report: “became a floating prison from which he and his 10-man crew could not escape without losing their claim to thousands of dollars in unpaid wages.” The ship’s owners had got into financial difficulties but would not sell the ship because they “would not get a good price”.

This is becoming an all too frequent story and in 2018 alone according to the IMO (International Maritime Organisation) an estimated 791 sailors on 44 ships had been abandoned in this way as a slump in orders led to overcapacity in cargo shipping and took its toll on owners.

Over the last couple of years, a global economic downturn has been gathering pace exacerbated by Trade Wars between the USA and China leading to lower demand on trade routes between...

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Are creditors and their lawyers using Winding-Up Petitions for debt collection?

I have written previously about short term thinking by businesses and the effect it has been having on their ability to plan ahead for the medium and longer term.

It has been affecting businesses’ ability to invest in capacity, efficiency and R & D as planning for growth. Instead, most SMEs seem to be focused on cash flow and immediate profits, in that order.

In the current uncertain economic climate short term thinking may seem to be a rational response by creditors seeking payment.

However, there is another, perhaps more worrying trend that I am seeing among creditors, many of them suppliers to SMEs. Larger companies owed money and their solicitor advisers are often pursuing debts by early use of a winding-up petition instead of speaking with their SME clients and if necessary helping them. Unlike most reporting which is about large companies delaying payments to SMEs, I am focusing on large companies’ aggressive debt collection from SMEs.

Sometimes it is necessary...

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