Tag Archive: insolvency

  1. Can You Have Your Cake & Eat It?

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    Patisserie Valerie is another case of corporate insolvencies continuing at a pace but do we all really know what they mean to us and our businesses.

     

    When dealing with companies there are two main types of insolvency – Administration and Liquidation.

     

     

    The simplest way to explain the difference is that:

    • Liquidation is not good,
    • Administration is better but still not great.

     

    Lets look at an example

    Patisserie Valerie- They entered Administration.

    This means that a third party will take over the running of the company, usually an Insolvency Practitioner (IP) or an Accountant with a view to finding a buyer for the company as a whole, or continuing to run it as a going concern..

     

    Deals are often made with the creditors of the business. They’ll offer people who are owed money say 40p in every £ owed, to reduce the liabilities of the business and to make it a more attractive proposition to buyers.

     

    For the established high street names Administration is the preferred option, so that the company can continue to run. The brand name continues and there is a possibility that some, if not most of the staff can keep their jobs.

     

    Successful Administration

    One such example of a ‘successful’ administration is HMV.

    • This is a high street name needing support to find a buyer and retain goodwill rather than close.
    • Administration was the preferred option.
    • Thankfully a buyer was found for HMV and the majority of the stores will remain open, safeguarding several thousand jobs.

     

    What if there wasn’t a buyer?

    If a buyer could not be found, or the company is found not to be a viable option for continued trade, as in the case of Carillion, then the company may enter Liquidation.

     

    Liquidation

    This is where a Liquidator or IP will affect a ‘fire sale’ of the company’s best assets such as:

    • stock,
    • order book,
    • machinery
    • plant

    Monies raised are to pay its creditors. However, because the company has closed and the brand no longer trades, there is no future revenue and the staff will unfortunately lose their jobs.

     

    In Summary

    Should you suffer the pain of having a company enter insolvency, then your best hope for a positive outcome is if it goes into administration. In which case you should always lodge your claim with the IP, as there is a chance that you could get paid a creditor’s dividend, or some pence in the pound against what you’re owed.

     

    If the outcome is liquidation, again lodge your claim with the IP but be aware that any dividend will only come about from the sale of assests and this is solely in the hands of the IP. So no guarantees, no timescales and less chance of a positive outcome.

     

    Remember,  there are ways and means of limiting your exposure to the risk and pain of bad debts and insolvencies. If you would like to discuss these options, please feel free to contact us as well as reading more of our blogs

  2. Can a Leopard really Change it’s Spots?

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    Large company failures…. They make the news on an almost weekly basis.

     

    Big high street brands such as Toys R Us and House of Fraser have suffered high profile insolvencies this year and others like Debenhams and Marks & Spencer have been forced into an aggressive program of store closures.

     

    In fact The Centre for Retail Research confirms that 41 high street names have entered insolvency so far in 2018… and it won’t end there.

     

    Now we realise that not everybody deals directly with these big high street brands but the likelihood is the chain of supply will work it’s way to your clients and suppliers in some way and will they be forced to pass on their pain to some degree ?

     

    The question is, what can you do to avoid being a victim in these trying times.

     

    The answer is simple, keep doing your diligence.

     

    Regular readers will know that we often speak about employing good checking processes and systems into your credit control procedures. In these trying times, let’s quickly revisit them.

     

    1. Conduct REGULAR credit checks on your client and suppliers.

    • Check for any adverse profit warnings, reduced credit scores and credit limits. All of these are indicators that the reference agencies and regulators are concerned.

     

    2. Reference Companies House and other business databases.

    • Check your existing and new information with the databases. Have new businesses been set up by the same directors ? Does this point to an imminent change in the business ?

     

    3. Do your diligence on the internet.

    • The internet is a great source of news and notices. If there are rumblings of troubles and insolvencies on the horizon, it’s better to be forewarned so you can act first, not last.

     

    Now we’re not saying that by you conducting the correct diligence, the rate of company insolvencies will fall, far from it.

     

    What we are saying is that in these days of companies closing, entering insolvency and then ‘pheonix-ing’ from the flames overnight into another business, you are better forewarned.

     

    For 2018 has definitely shown us that your leopard can indeed change it’s spots.

     

    If you would like to learn more about the diligence, credit control processes and methods to improve overall cash flow in your business check out our other News Blogs or attend our Seminar, that is taking place as part of Leeds Biz Week.

    Register to attend the Seminar