Directors be warned!

A business no longer has to be in formal insolvency before the Insolvency Service can investigate directors’ abusing their powers over Covid loans.

Since December 2021 the service has been given powers to crack down on company directors who dissolve their firms to avoid making repayments on government backed loans.

These powers are retrospective to allow conduct that took place before the law comes into force to be investigated.

So far the service has banned three individuals from acting as company directors, for dissolving their companies to avoid paying back Covid support loans.

Directors can be banned for up to 15 years under the new powers.

Last year, before the new powers were granted the service successfully petitioned the Courts to wind up five limited companies that have been involved in abusing government loans, introduced to help businesses during the pandemic.

Directors should be aware of their legal obligations to run their businesses according to the various laws...

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Don't give up!

According to PwC the number of UK firms filing for insolvency in the first quarter was broadly similar to the same period in 2021.

But they also reported: “when the smallest firms and companies that were liquidated when solvent are stripped out, the figures show those filing while insolvent more than doubled in the first quarter…”  (our italics).

But why would a solvent company go into liquidation?

Well, there could be a number of reasons, perhaps related to family or lack of successors.

However, given the number of economic headwinds, including inflation, supply chain problems, labour shortages and energy costs, as BDO has reported business optimism has fallen by 4.82 points to 101.93, for the second consecutive month, perhaps it should not be so surprising that patience is wearing thin.

Don’t throw in the towel just yet!

We would advise businesses to hang on in there, especially if they are still solvent, conditions will eventually turn around as they...

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Insolvencies are rising fast

Insolvencies are rising fast

But don’t give up now when help is at hand

The insolvency service figures for the first Quarter of 2022 make grim reading with totals at their highest since 2012.

Of the 4,896 insolvencies in England and Wales in Q1 4274 were creditors’ voluntary liquidations.

The Begbies Traynor Red Flag alert put the number of businesses in “critical distress” as up by 19% compared to the same quarter in 2021.

All this makes grim news for businesses that have survived the two years of disruption due to the Covid-19 pandemic and despite considerable ongoing cost, recruitment and supply issues have been hoping for at least some improvement in their activity levels.

The most vulnerable, according to Begbies Traynor, are the hospitality and construction industries.

But businesses should not give up when there is help at hand. The sooner you act the higher your chances of survival.

We are experienced in assessing every aspect of a business and coming...

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A problem shared...

insolvency vat Apr 01, 2022

The start of April sees a number of additional burdens placed on businesses.

In addition to increased National Insurance contributions, there are the ongoing problems of supply chain issues and higher energy prices.

Also, the remaining temporary measures to protect insolvent businesses by restricting winding up processes have now ended and as of this month, businesses now have to pay back all VAT deferred in the period to June 2020 under pandemic reliefs.

As if all this were not enough, changes made to the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 in February this year put directors under increasing scrutiny from the Insolvency Service by extending its powers to investigate the conduct of directors of dissolved companies.

This makes it harder for businesses to use creditors’ voluntary liquidation (CVL) process to close down an insolvent company.

a problem halved?

Many CEOs and directors struggle on in silence sharing none of...

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It's good to talk

cash flow insolvency Oct 07, 2021

In tough and painful situations it can be tempting for business owners to struggle on, or live on hope, rather than acknowledging that it’s time to call in help.

It can lead to sleepless nights and a reduction in your ability to get a grip on the situation or make sensible decisions.

It will not solve the problems of mounting debt, the threat of County Court Judgements (CCJs) and insolvency.

I am here to take your calls if you’d like to talk to a real human being with experience of rescuing and turning around businesses.

Get a grip!

The first step to resolving business problems is to know exactly what the situation is.

K2 has a number of free tools for download that can help businesses to get a grip on their situation.

They include a Cash Management tool: https://lnkd.in/gr4bkxW

And if things have gone further there is K2's Guide to dealing with CCJs: https://lnkd.in/ghPgehx

So banish those sleepless nights and worries and get in touch.

Remember the old...

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Insolvencies. Now is not the time to relax

cash flow insolvency May 20, 2021

The most recent Insolvency Service figures have revealed that company insolvencies are 35% lower than before the coronavirus crisis.

The report shows that 925 companies were declared insolvent in April compared with 1,429 in the same month in 2019 and 1,199 last year.

However, we are only at the start of recovering from various interruptions to business and from lockdowns.

Also, sooner or later the Government’s temporary restrictions on the use of statutory demands and on certain winding-up petitions will come to an end.

It is therefore likely that as businesses start to pay back their various Covid-related loans and other deferred payments, insolvencies will rise again.

Begbies Traynor’s most recent Red Flag alert for Q1 showed that 723,000 businesses were now in ‘significant financial distress1’, a 15% increase from Q4 2020 to Q2 2021.

Given all the above, we would urge businesses to continue to very carefully manage their cash flow and beware of...

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Potential Coronavirus pandemic business winners and losers

Given the slight easing of Coronavirus-related restrictions a week ago, some businesses are in the very early stages of preparing to return to “normal” but which businesses are likely to emerge as the winners and losers in the future?

The Insolvency Service is now publishing its figures monthly and the April figures were released last week. They reported that “numbers of companies and individuals entering insolvency in April 2020 broadly returned to pre-lockdown March levels for most insolvency types” and their figures showed that total company insolvencies in April 2020 had decreased by 17% when compared to April 2019, with a total of 1,196 company insolvencies of which the majority were CVLs (Company Voluntary Liquidations). These numbers suggest no influence in insolvency from Coronavirus yet.

The figures come with a warning, however, that the operation of courts and tribunals had been much reduced, HMRC had reduced enforcement activity and there were...

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The latest insolvency statistics for the first quarter of 2020 don’t tell the whole story

Astonishingly given the news coverage of a financial fallout due to the Coronavirus pandemic, the latest insolvency statistics for Q1 January to March 2020, show a decrease both when compared to the previous quarter and to the same quarter in 2019.

The figures, published by the Insolvency Service yesterday, showed a total of 3,883 company insolvencies with the majority again being in CVLs (Company Voluntary Liquidations).

This was a decrease of 10% compared with the last quarter of 2019, October to December, and of 6% when compared to January to March quarter of 2019.

Construction continued to have the highest number of insolvencies, followed by the wholesale and retail trade and accommodation and food services.

While these insolvency statistics cover the period before the lockdown due to the Coronavirus pandemic was imposed a drop in insolvencies is still surprising given that economies in the UK and EU had been slowing in previous months.

There is more clarity, however, from the...

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Late Payments putting even more pressure on SMEs in 2020

The amount owed to UK SMEs in late payments had allegedly risen to £50bn in early January according to research by digital banking platform Tide as reported by CityAM.

It has calculated that the average UK SME is chasing five outstanding invoices at once, wasting an hour and a half every day.

Data from Pay UK, which runs the Bacs Direct Credit and Direct Debit payment services, later in the month revealed that late payments had reached a four-year high last year at £23bn.

Tide’s new £50bn total was considerably higher than Pay UK’s total of £23bn owed to SMEs and I cannot reconcile the two figures.  The Tide research was conducted by Atomik Research among 1,002 SME decision makers from the UK and, it appears, judging by a footnote to the Tide report, that its £50bn figure may have been estimated on the basis of a total of 5.9 million SMEs, as calculated by The Department for Business .

However, the situation puts immense pressure on...

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Running out of cash – crisis management, the first step in dealing with a cash crisis

Crisis management when a company is in financial difficulties is about quelling the understandable panic and taking a long, hard look at managing the business’ cash flow and the potential for action that makes the business viable.

Running out of cash is the cause of most business failures where the cash flow test of insolvency applies such that a company is insolvent if it is unable to meet its liabilities as and when they fall due. This doesn’t mean the business should be closed down but it does mean the directors should take clear steps to deal with the financial situation.

The first thing directors need to appreciate is that their primary consideration is to protect the interests of creditors rather than that of shareholders. This is where an insolvency or turnaround professional as an outsider can help by bringing an objective assessment of the personal risk when making decisions and the prospects that turnaround initiatives can be taken to restore the business to...

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