Archive for March, 2010

Crackdown On Pre-Pack Insolvency Deals

Friday, March 26th, 2010 at 0  

Pre-pack administration - insolvency

Pre-Pack Insolvency 

The government has vowed to crack down on the exploitation of so-called pre-pack administrations by closing loopholes used by owners of insolvent businesses.

The pre-pack system allows the healthy part of a business that has gone into administration to be sold on quickly, often to its own directors, so it can keep on trading and paying its staff.

But experts say some directors take advantage by selling the business to themselves at a knock-down price to free themselves of debts, leaving creditors – usually local businesses – in the lurch.

Pre-pack Advice From The UK's Leading Expert

 

Moe Nawaz (as seen on TV) is a nationally recognised insolvency auditor who has focused on providing insolvency help to business owners and company directors for over 20 years. He regularly travels the country training accountants and solicitors and enrolled agents on how to handle their toughest cases with the Inland Revenue and Customs and Excise. Moe is highly ranked among the top insolvency auditors in the country, with two books to his credit as an author “The Insolvency Survival Guide For Businesses” and his second book “Bankruptcy Guide”. With clients from Scotland through to Devon Moe enjoys travelling to meet his clients, he has what it takes to solve your tax or VAT problems for your company no matter where you live in the United Kingdom. If you would like more information about his practice and how he can help you, please call his office on 0800 24 0800

Crackdown On Pre-Pack Insolvency

A Derbyshire farmer, Daphne Tilley, told the Guardian that her family business was left with £9,000 of unpaid bills after a restaurant she supplied with meat run by the celebrity chef Tom Aikens went bust.

According to company accounts, Aiken's two restaurants owed creditors a total of £3m. But by taking advantage of the pre-pack scheme – which is perfectly legal – they carried on trading as normal after their holding company was sold for an unknown sum to an investment group. Aikens remained as head chef and became a partner and shareholder in the new holding company, although he personally lost a large part of his original investment.

Tilley said her business, Elwy Valley Welsh Lamb, had to lay off several staff as a result. "What angers me most is his lifestyle and the fact they kept all their jobs, yet he put people like us into serious difficulty. He won't help other people's staff. It's disgraceful."

A government body, the Insolvency Service, introduced new reporting guidelines last year for administrators to make pre-pack deals more transparent, particularly when they involved a management buyout of part of the business. This would give creditors more information about whether a fair price was achieved in any transaction, and would allow them to make a legal challenge if they believed their claims were being ignored.

But the Insolvency Service claims that a third of the new "SIP 16" reports administrators are required to draw up are incomplete or missing entirely. It wants to make completion of the report compulsory and to appoint an official receiver to provide independent scrutiny of directors' and administrators' actions.

The new rules, backed by the government, would try to prevent conflicts of interests by making it impossible for a person advising on a pre-pack to be the administrator. Creditors would also have to sanction pre-pack deals involving connected parties such as company directors.

But the insolvency profession trade body, R3, blamed the Insolvency Service for not providing clear guidelines on how to complete the SIP 16 forms and said the changes could drive up costs.

Karl Clowry, a corporate partner with the law firm Paul Hastings, said: "The taxman is one of the biggest creditors when companies go into administration. So it's not surprising that ministers want to clamp down on any non-compliance. I think it's possible that the government has exaggerated the number of SIP 16s which are not completed properly.Non-compliance does not always equate to malfeasance."

He admitted that "naive and inexperienced" directors often call in administrators too late and rush a pre-pack deal. "The best price may, in exceptional circumstances, not be secured for creditors due to critical time pressure."

But he also argued that many unsecured creditors would lose out in an administration anyway, whether it involved a pre-pack or not. "Matthew Fell, director of company affairs at the CBI, said: "These changes will help ensure it is a legitimate rescue effort, and not just a vehicle for incumbent management to carry on with business as usual having shed their original debts."

"Phoenix" deals

The rationale behind "pre-pack" deals between struggling managers and administrators is that they allow companies to keep going and preserve jobs. But there are also fears that the deals are stitch-ups allowing firms to ditch their creditors but stay under the same management.

High profile "phoenix" deals have become far more popular in recent years and are regularly used in the pub, restaurant and retail trades.

Among the most controversial pre-packs was that by Lord Bilimoria's Cobra Beer business. It collapsed last year and the peer, together with new partner Molson Coors, immediately bought the business out of administration. Creditors were left facing losses of more than £70m – although Lord Bilimoria has said he intends to repay them when he is able.

The Laurel group – the Slug & Lettuce pubs and La Tasca restaurants business controlled by property entrepreneur Robert Tchenguiz – used a pre-pack two years ago. It went into administration and Tchenguiz immediately repurchased 293 of its 383 outlets through two new companies.

The Officers Club deal happened on the same day: the 150-store chain collapsed and 118 profitable stores were immediately repurchased by the group's original founder David Charlton.

On a bigger scale, the Mosaic fashion group used a pre-pack last year when it collapsed in the wake of its 49% Icelandic shareholder and its Icelandic bank backer. Four core chains – Karen Millen, Oasis, Warehouse and Coast – were bought from the administrator on the same day, saving 8,000 UK jobs. Chief executive Derek Lovelock reacted to criticism of the pre-pack deal by saying that all his suppliers had been paid.

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach 

Taxman Killing Businesses

Friday, March 26th, 2010 at 0  

Helen Power, Gráinne Gilmore, Peter Jones  Timesonline.co.uk

The taxman is forcing recession-hit businesses to the wall, critics said yesterday as Revenue & Customs was implicated in the collapse of the Jarvis engineering business and the Scottish airline Highland Airways.

HMRC, which the Chancellor said on Wednesday would extend the Time to Pay scheme to help businesses affected by the recession, also issued nearly a third of all winding-up petitions in England and Wales last year as it clamped down on late taxpayers such as Portsmouth Football Club.

Stephen Alambritis, spokesman for the Federation of Small Businesses, said: “We have sensed a harsher approach towards businesses. This is at odds with what the Chancellor said in the Budget. ”

The Times has learnt that Jarvis’s lenders felt they had no choice other than to put 2,000 jobs at risk by putting the company into administration because they believed other creditors, including HMRC, were set to bankrupt Jarvis themselves. Bank of America and Bank of Ireland, which put Jarvis into administration over a loan of just £15 million, declined to comment. But it is understood they had received final demands for payment from HMRC and other creditors. HMRC was owed £3.2 million, according to Jarvis’s most recent accounts.

Highland Airways, which provides vital links to remote areas of Scotland, was the subject of a formal HMRC winding-up order. Scottish MPs queued up yesterday to say that the taxman had pushed the company over the edge. Danny Alexander, MP for Inverness, asked Treasury minister Stephen Timms to defer Highland Airways’ tax bill. He said: “If HMRC had been willing to live up to its promise to support businesses through the recession, then 100 people would still have a job this morning.”

Directors of the Inverness-based airline called in administrators Price water house Coopers on Wednesday night. All of its flights have been cancelled.

Bruce Cartwright, joint administrator, said: “The company had encountered trading difficulties, including the loss of certain contracts.”

While Lord Mandelson, the Business Secretary, has intervened in a number of administrations, including Woolworths, to ask lenders not to pull the plug, it is not known whether he asked HMRC to hold fire on either Highland Airways or Jarvis.

An HMRC spokesman said yesterday that he could not comment on individual cases adding: “HMRC only initiates winding-up or bankruptcy action where it believes this really is the best course of action to protect the interests of the Exchequer and in fairness to those who pay their tax on time.”

Advisers say that the taxman has stepped up enforcement against businesses under pressure from the Government to help to plug Britain’s yawning £857 billion national debt.

David Hudson, head of formal insolvency at Baker Tilly, said: “HMRC is now under real pressure from government to get heavier on its tax collection, so there has been a clear tightening of its Time to Pay’ scheme. What we are witnessing is how tough HMRC is becoming as a key creditor in the insolvency process.”

The Chancellor introduced new powers in the Budget to allow HMRC to demand money upfront from companies that are persistently late with income taxes and national insurance contributions. In the period between April 2008 and September 2009, HMRC issued about 5,800 winding-up petitions in England and Wales — some 30 per cent of all those issued.

 

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach 

Six Tips for Financially Troubled Businesses

Monday, March 22nd, 2010 at 0  

1. Keep Your PAYE & VAT Paid To Date. First rule for the owner of any financially struggling business is to make sure you pay all your PAYE taxes on time, especially those deducted from employees' wages. Even if you are a sole trader or a limited liability company, the Inland Revenue can hold you personally liable for these taxes plus penalties if they're not paid. And even if the business goes bankrupt or in the case of a limited company, you could personally and legally be liable to pay them.

 2. Cash Flow Problems. Cash flow problems are one of the biggest causes of business failure.  When you know you don't have enough sales income coming in to pay the bills that are due, slow your outgoings immediately by cutting expenses to the bone. If you don’t learn to balance your income –V- expenditure you will most certainly be heading for the bankruptcy courts. You must prepare a short-term cash projection and plan for your immediate needs. Make a list of the monies owed to you, and collect as much of it as possible. Pay the necessary items like taxes and overhead costs, but delay paying other bills by working with suppliers and other creditors, talk to these people use your relationship to work out a payment plan.

 

3. Lying About Your Business Debts. I have seen people take business loans out by falsifying there application forms just to get the loan through. Soon after the loan only to find out they are unable to repay the loan back. It is amazing how many of these people think well if the company goes under its hard luck to the bank or the loan company for making the loan. No No No this is not the case, the loans can be reverted back to you personally if they are able to prove that the loan application was fraudulent. Once they are able to prove that it then also becomes a criminal offence also.  So if you decide that you need to apply for a business loan make sure you disclose the financial condition of your business then that way you will have nothing to worry about.

 

 4. Transferring Business Assets. What really amazes me that the number of times I have seen business owners transferring assets of the company when they know that the business is heading for bankruptcy. They do the most stupid things you can imagine like transferring property and other assets to friends or family. They must really think that the creditors and the Insolvency Practitioners are not aware of things like this? Dream on, they are fully switched on to these kind of trick and can revert transactions going back as far as 7 years if need be.  Again it become a criminal offence once you do this as you are hiding your assets from your creditors.

  5. Preferential Payments. You as owners are in a position of trust when it comes down to creditors money. Under normal trading it is ok to pay one creditor over another as long as you are paying every one on equal terms. But when your business id going through though financial times and you start paying one creditor over another and the company fails. You could face criminal charges and the transactions can be reversed back by the courts. In the event that your business fails then your outgoing payments will be scrutinised by the creditors or the Insolvency Practitioner to make sure that some creditors weren’t given unfair advantage and paid when others were paid nothing. Creditors who have security will no doubt exercise there rights to terminate and collect on the security.  

 

6. Wise to Keep Two Bank Accounts. If your business is facing serious financial problems and owes money to a bank, it's often wise to keep most of your current and other accounts with another bank who you don’t owe money to. This is because typically your loan agreement gives the bank the right to take your funds without prior notice if the bank thinks you're in financial trouble. (This is called a "offsetting.") It can be a shock to learn that one morning your bank has suddenly cleared out your funds from your current account.

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach 

 

Bankruptcy And What To Expect

Thursday, March 18th, 2010 at 0  

Money Talk
By Louise Brittain
Insolvency partner at Deloitte's

BBC News

Money Problems - bankruptcy - insolvency

The word bankruptcy comes from two old English words, "bankus" which means a tradesman's table and "ruptus" which means to break.

In old England, only traders could be made bankrupt and they were then subjected to punishments such as the stocks and "the clink" – the debtors' prison where day release was granted to allow debtors to work to pay off their debts.

The rules have changed somewhat since then and some may say bankruptcy is now too easy an option.

However, there is still much misinformation about what happens when you are made bankrupt and a lot of rumour that has almost become modern myth.

The curtain falls

Anyone who owes more than £750 can technically be made bankrupt.

However, you cannot be made bankrupt overnight and it is only if you have received a statutory demand or have a judgement made against you that a creditor can begin bankruptcy proceedings.

At the start of bankruptcy proceedings, you will normally be personally served with a bankruptcy petition.

From the time that petition is filed at court, you then have at least 28 days to pay the debt or have it removed.

This is, however, a minimum period and often it takes longer than this before you are required to attend court to be made bankrupt.

On the day you are to be made bankrupt, there will be a hearing and you will need to attend court.

The hearings are normally short and the date and time that you are made bankrupt is noted.

Think of that time as the time the bankruptcy curtain falls and closes the chapter on your financial past and allows you to step towards your financial future.

Relief

Living under the burden of debt is crippling, but in the right circumstances, bankruptcy can be a relief.

   
When you are made bankrupt, your bankruptcy generally lasts for one year

Once you are made bankrupt, your financial affairs are passed to the government department called the Official Receiver to be dealt with.

They review your affairs and decide whether your case is sufficiently complicated to be passed on and handled by a private insolvency practitioner.

If your estate is simple, then it will remain with the Official Receiver.

Either way, before the Official Receiver makes that decision, he will interview you either in person or by telephone.

All your creditors must now deal with the Official Receiver and cannot continue to contact you directly.

Terms and conditions

When you are made bankrupt, your bankruptcy generally lasts for one year.

During that year, you cannot act as a director of a limited company or be involved in the management of a company.

You can incur credit, provided you inform the person giving you credit that you are bankrupt, and you can operate a bank account.

You can, and should, seek gainful employment during your bankruptcy.

After the end of the 12-month period, provided you have co-operated fully, then your bankruptcy is discharged and all your debts are written off.

I am often asked whether it is okay to transfer assets or give money to perhaps family or friends in the run-up to bankruptcy – and the short answer is "no".

Any transfer you make to anyone within five years of your bankruptcy can be reversed, unless it is a sale for proper value.

In short, if you have financial problems you are struggling with, seek professional advice.

The Citizens Advice Bureau is a good place to start or speak to your local licensed insolvency practitioner who is properly qualified to advise you.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.
 

When You Need Someone On Your Side, That You Can Trust

Nottingham Insolvency Helpline is run by Moe Nawaz and his team. Moe is one of the top Insolvency Auditors and the author of “The Insolvency Survival Guide For Businesses” and co author of “Bankruptcy Guide” both these books are on amazon.co.uk

 

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach 

Insolvency Practitioners and Landlords Fight It Out

Thursday, March 18th, 2010 at 0  

The relationship between insolvency practitioners (IP) and landlords could be put under even further strain following administration threats by one of the UK’s largest companies.

Landlords claim that office provider Regus has threatened to place its smaller sites into an insolvency process if they did not renegotiate property contracts.

Liz Peace, chief executive of the British Property Federation, said that the Regus ploy was “cynical” and called for insolvency rules to be tightened to stop similar situations happening in the future.

The insolvency profession is concerned the conflict could hamper their dealings with landlords in future situations.

There is already a strain in the relationship, as landlords feel they lose out in some administrations, say advisers. “The last thing IPs want is to sit down with landlords in a case and for them to say ‘hang on,
you did this in another case’,” said Garry Brett, insolvency expert and partner in real estate at law firm Stevens & Bolton.

Chris Laughton, partner and IP at Mercer & Hole, believes landlords should use an insolvency expert to help determine whether insolvency processes have been used fairly.

Regus, which posted profits of £2m in the last year, told Accountancy Age it had sought to “re-gear” its landlord ­liabilities by requesting renegotiations of its rental fees on a small number of loss-making properties.

In our view

The move could have ripple affects on future administrations. IPs are widely seen as playing it tough when it comes to negotiating contacts. However they should be seen as the helping hand in a difficult situation, and someone to be welcomed – not the strong arm of the law with which companies can make their threats with.

 

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach 

Bankruptcy Seminar in Birmingham

Monday, March 8th, 2010 at 0  

Bankruptcy Seminar In Birmingham (April 2010)

Insolvency Birmingham

Birmingham Insolvency Helpline 0800 24 0800

Is your business in financial trouble? Has the recent recession put a major crimp in your cash flow? Take heart! You do have options.

Two of the speakers are well known authors on bankruptcy and debts Moe Nawaz a business turnaround consultant from Birmingham and Kiran Mistry an insolvency practitioner from Leicester.

Bankruptcy is always an option for people living in Birmingham or the UK. But there are alternatives. Come to a FREE presentation by experienced insolvency practitioners about you choices. Learn how bankruptcy could help, or about other ways to get cooperation from creditors. Also get tools to help decide if you should just close the business down. Find out more click this and contact us.. Or for Free company insolvency or company liquidation help call 0800 24 0800.

 

Moe Nawaz – Author – Speaker – Insolvency Auditor - Business Coach