So an article in a recent edition of The Economist makes especially interesting reading. Research quoted there shows an increasing number of businesses incurring losses. Of course, even the best of businesses run at a loss from time to time particularly, for example, when a new product or service line is being developed or a major restructuring is taking place. There’s no problem with taking high costs in the short term for big profits in the long term.

The research quoted in The Economist, though, shows that for some companies losses are becoming something of a habit, and the number of quoted companies issuing profit warnings is on the up. Many businesses – “zombie companies” – are only being kept alive thanks to the forbearance of their banks and, to some extent, a fairly relaxed approach by HMRC. Low interest rates are keeping some businesses on life support. But an economy in which firms can only operate at rock bottom interest rates is clearly a pretty brittle one.

The prevalence of weak businesses means that a pick-up in the company insolvency rate is more than just a distinct possibility. More failures would not only create higher unemployment, it could also cause more problems for the banks; loans are often secured against equipment or machinery which has little resale value, leading to losses and further provisions.

So it’s very much a case of “watch this space”. A business insolvency boom may yet happen. Meanwhile businesses which are struggling ought to be advised to take advice about their position. Where corporate recovery advice is taken early enough, it is often possible to salvage something from what might otherwise be a lost cause.

An initial meeting with an experienced member of our corporate recovery Team will always be without obligation so contact us now.

Officials at BIS seem to take a particularly dim view of directors whose companies fail to pay taxes. They maintain – and who could argue with them? – that companies which do not pay tax gain an unfair advantage over their competitors.

In January 2013 alone:

Benny Albert Lazar ran The Synergy Spa Limited, a beauty salon, which traded from January 2008 until it went into liquidation in July 2010. When it ceased trading it owed creditors £153,391, including £110,174 to HMRC. During its whole period of trading it had paid just £20,163 in taxes. Mr Lazar also owned a bar, 19th Hole Ealing Limited, which went into liquidation on the same day as Synergy with total liabilities of £74,934, including £50,934 to HMRC.

The assets of 19th Hole were sold to another of Mr Lazar’s companies, R & L Ruislip Taverns Limited for £6,000, but that company also went into liquidation, less than a year later, owing HMRC £21,058.

Mr Lazar has been disqualified from acting as a director for four years.

Paul Andrew Charles Sterry and Darren Alan McGaughey ran a suspended ceiling company called BCP (NW) Limited which went into administration in November 2010 with total debts of £1.3 million. Of that, £598,547 had accrued to HMRC in the last 12 months of trading. There were also issues over the adequacy of the accounting records.

Sterry and McGaughey were disqualified for six years and five years respectively.

Gareth David Onions was a director of Deltaworld Limited, a company which field staff for merchandising. The company went into administration in March 2011 owing HMRC some £648,137 for PAYE and NICs. Between December 2008 and October 2010 the company had made only one payment (of £3,300) to HMRC, whereas Mr Onions had drawn £240,000 for himself.

Mr Onions has been disqualified for five years. Mr Onions had previously also banned for four years in relation to another company failure. The two bans will run concurrently.

Finally, there’s the case of Brett Jones, Andrew O’Dwyer and Loretta Jones, who were directors of BLA Trading Limited. BLA sold small electrical goods on E-Bay. The company went into liquidation in January 2011. an investigation found that the company had submitted incorrect VAT returns between December 2008 and June 2010. The returns disclosed VAT due of £3,140, whilst the true figure was £303,591.

Brett Jones has been disqualified for 9 years, O’Dwyer for 8 years, and Loretta Jones for 3½ years.

For a company that’s struggling with its cash flow, it must often be tempting to delay tax payments. After all, aren’t the priority payments to employees and to make sure that the company gets the supplies which are needed to keep trading? The message of these cases is that there may be long term consequences from the short term gain. And with the impending introduction of RTI, the chances of getting away with it for very long are even more remote.

For advice on company insolvency or for bankruptcy advice contact Burton Sweet Corporate Recovery today to speak to one of our highly skilled insolvency practitioners.

Businesses are about creating prosperity and jobs, but company insolvencies are a fact of life in a modern economy.

A pre-packaged sale (hence “pre-pack”) is a pre-arranged sale of an insolvent company’s assets at market value to a new company (“newco”), and may often involve the existing management. The newco re-employs the existing staff, probably produces the same products from the same premises, uses the same equipment, and with a similar name!

The process involved is not, perhaps surprisingly to some, illegal and pre-packs have been sanctioned by the government, the Courts and regulatory bodies. The majority of pre-packs are perfectly legitimate (although some look decidedly dodgy!) and actually provide a better outcome for creditors.

The justification for pre-packs is that, by the time a company goes into formal company insolvency, it’s probably exhausted its cash reserves and suppliers’ credit. Once an administration or liquidation starts, invariably customers stop paying, suppliers stop supplying and key, highly skilled employees may leave, perhaps going to competitors. What’s more, it may be difficult to raise the cash needed to carry on trading even for a short period.

All those are reasons to avoid a protracted, publicly advertised sale procedure. You might argue that a “secret sale” is better than no sale at all. And since the directors know the business and its assets better than anyone, they may well be prepared to pay more than an arm’s length purchaser.

However, a word of caution. Selling an insolvent company’s business and assets is a complex and highly specialist process with many potential pitfalls, and pre-packs are not appropriate in all cases. Doing the job properly calls for detailed business insolvency knowledge and experience, and should never be attempted without the input of a qualified insolvency practitioner.

The team of insolvency practitioners at Burton Sweet Corporate Recovery has vast experience of advising directors of distressed companies. Call us today for advice on company insolvency or for a free, no obligation discussion of the options available.

According to research carried out by Credit Action, the financial education charity, outstanding personal debt in the UK stood at £1.420 trillion at the end of November 2012. That means that UK individuals owed almost as much as the entire country produced in the whole of 2011!

Credit Action’s latest report also shows that every day:

• 307 people are declared bankrupt or become formally insolvent – one person every 4 minutes 42 seconds

• 1,556 County Court judgements are issued against consumers

• 155 mortgage possession claims are issued and 111 possession orders made

• 426 landlord possession claims are issued and 281 landlord possession orders made

• In the year to September 2012, Citizens Advice Bureaux dealt with 8,308 new debt problems

Meanwhile, Citizens Advice research has highlighted some of the ways in which problems which affect people who are making ends meet:

• 51% of individuals with debt problems said their work performance was suffering

• 56% said they had seen personal relationships falter

• 79% reported sleepless nights

• 51% had suffered an anxiety attack

The good news is that there is light at the end of the tunnel for anyone who is concerned about the level of their debts. Debt problems are rarely insuperable with the right advice. For example, it may be possible to negotiate an informal debt management plan with your creditors, or you may qualify for an individual voluntary arrangement (or IVA) if something more formal is needed there is also bankruptcy advice readily available.

What’s vital is that, if debts are becoming a struggle, you should take advice sooner rather than later. At Burton Sweet Corporate Recovery we won’t charge simply for listening to your problems and suggesting solutions in a clear, jargon-free way.

Why not call us today for a conversation, completely free of charge? We can talk you through your options including IVA advice and bankruptcy advice.

Yet very few companies fail overnight. In most cases the warning signs are there to be seen many months, perhaps even years, before the axe falls. Like ships, most sink gradually; very few hit icebergs.

A business on the slippery slope starts by underperforming, making less profit than it ought. That results in less to invest in new products or processes, and slowly, insidiously it starts to fall behind the competition. Its reputation in the market starts to suffer and, before long, it starts incurring losses.

In order to fund those losses it starts to juggle its cash. Very often the bank will want extra security, or personal guarantees from directors, as the account is constantly up against its overdraft limit. It will start extending credit terms with its suppliers, perhaps making round sums on account instead of paying balances in full. Staff morale will start to suffer and the quality of output may deteriorate.

The distress leads to crisis as the business is “on stop” with suppliers. If the company can’t get supplies, then it can’t finish orders, which means it can’t bill its customers, which means it can’t get paid. Suppliers’ solicitors’ letters and legal threats lead to legal action.

And if it can’t get cash to pay the wages or the rent, then it’s all over.

Many insolvencies could have been avoided if only the warning signs had been spotted and insolvency advice and action had been taken, earlier. As insolvency practitioners, we view winding companies up as being a last resort. We always start with the objective of trying to rescue, or turn around, companies in financial difficulties.

However, when the bailiff is knocking on the door, the landlord is threatening to distrain, the winding up petition is due to be heard and the bank won’t pay the wages, it’s usually too late. So the earlier our insolvency advice is sought, the greater the chance of success.

When a fire is just smouldering, it may be difficult to see, but it can be reasonably easy to put out with relatively little damage. Once it becomes a conflagration it which will much more difficult to control and the damage will be considerable. In just the same way, business problems may be hard to spot in their early stages, but if they are dealt with early on they are much easier to address and the consequences will be much less damaging than they might be otherwise.

So don’t be an ostrich – don’t bury your head in the sand. Take insolvency advice as soon as you can.

Here’s a quick step by step guide to getting things back on track:

• Be brutally honest. There’s no point in burying your head in the sand and pretending that there’s no crisis. Moving numbers around the accounts solves nothing, and don’t kid yourself that there’s some huge new profitable contract coming in next week. Ditch the false optimism and face reality.

• Understand your cash flow. It’s vital that you understand when your cash is coming in and when it’s going out. Make sure you have a carefully prepared cash flow forecast for at least the next three months, prepared on a weekly basis, and keep it up to date. Three months ought to be straightforward to predict; much longer than that and it may be like trying to gaze into a crystal ball. Be realistic in terms of what you’ll sell, and how long it will take customers to pay.

• Make sure the cash is available for when it’s needed. Raise cash by getting rid of assets you don’t need, renegotiating terms with suppliers, and chasing overdue debts. Factoring or invoice discounting may be worth thinking about in some cases. Manage stock levels and get rid of any that’s redundant or out of date. It’s better to convert some of it to cash, even at a loss, than having it clogging up the stores and producing nothing. Talk to HMRC before letting tax debts get into arrears – they’ll usually try to help when they can. And for goodness sake keep in touch with the bank and other lenders.

• Get a plan. The people working in the business usually have a fair idea between them of what’s wrong, and what needs to be done to fix it. So trust your staff and listen to what they have to say. It’s amazing the difference that communication and honesty can make. Of course some will have personal axes to grind, or indulge in blame and arguments. You need to filter those out and that takes experience, but often it’s only a handful of changes that are needed to turn a business around. So put together a plan, get buy-in from everyone – and make sure the plan’s on paper.

• Get support. The skills needed to manage a business in distress are very different to those needed when everything’s going swimmingly. That’s why you probably need the support of someone an experienced insolvency company; someone who’s been there, done it and got the t-shirt. We don’t charge for just listening to your problems and setting out some options.

Call Burton Sweet Corporate Recovery for a free, no obligation conversation.

It is believed one of its major down falls was the decision to focus more on manufacturing printers, and shift away from the camera market. An odd move since the camera was the reason for the companies original success. Kodak has been in existence for over 133 years and its directors unanimously voted for taking these insolvency advice measures to create the best chance of survival.
Ironically, Kodak’s problems stemmed from their original success – selling film, which made them an over night success for decades. The digital camera was born and film sales plummeted. Its not like Kodak did not see this coming, how could anybody not see the digital age come galloping over the horizon at the speed of light. They simply hesitated for too long, it was felt moving away from film would essentially disembowel the business and this caused them to stall on formulating a new strategy, the result – competitors over took!

Kodak are implementing many of the measures that would be included as part of any insolvency advice strategy. A credit facility to the tune of £615million through Citigroup has been put into place and shares have been suspended, which have been in decline for the last decade. Concentrated efforts will be aligned to new product development in the area of digital and future technological advancement, an area, if tackled correctly is the most likely to spring board them back to success.

The best advice any business can take is to follow in the foot steps of Kodak in terms of the way they are tackling their corporate recovery. As soon as problems arise, do not ignore the situation, seek insolvency advice and put measures in place to try and save your business. There is nearly always a solution to any problem and we can help you find it. Burton Sweet wishes Kodak a successful future and full business recovery.

Ex-international footballer Colin Hendry was confirmed bankrupt despite huge personal wealth and many successful business interests. The prospect of bankruptcy and financial difficulty is not limited to businesses and individuals of lower incomes and turnover, sometimes the more you have, the greater the risk of loss. For businesses, if issues are addressed early on and they are not left to spiral out of control, as in the case off Hendry, corporate recovery can mean the difference between future or failure.

Ex Rangers player Hendry made millions across his high profile career. It was confirmed that he owes around £2.2 million to the taxman and other creditors, some of whom are family and friends. He had established 3 successful businesses in as many years and now has only a very frugal £250 credit limit at the bank.

He admitted to the courts that gambling had played a large part in his financial problems and the bad habits began soon after the death of his wife, who died after a plastic surgery procedure went wrong. Hendry struggled to cope with her death and his gambling quickly spiralled out of control. He owes Spreadex – an online gambling company over £30,000. They have now filed a bankruptcy petition against the footballer which is to be held at Blackpool County Court. This is just a tiny portion of what the player owes in gambling and taxation debts.

Burton Sweet Corporate Recovery deals with a whole host of issues that pertain to the circumstances of businesses and individuals when we are providing insolvency advice. It doesn’t matter what caused the financial troubles but how corporate recovery or individual recovery are tackled to get over the issues and Burton Sweet are experts in this field.

1) External conditions outside of the business, like an increase in the costs associated with running a business, a new competitor opening down the road or some sort of act of god like a flood or fire. There is little you can do to avoid these things happening, except adjust the internal factors taking place in your business accordingly.

2) Internal business conditions that can be controlled, such as bad location, an unbalanced client portfolio and weak management. These factors can be adjusted, if your premises are in the wrong location then move. If you rely on clients from one major industry or have one client that generates 80% of your revenue, have a think about how vulnerable this makes your business. If that industry sector hits problems or your one major client goes under – you could too!

3) Tax related issues are a vey common area of concern, particularly to smaller business owners who perhaps don’t have the processes in place for tax to be managed via automated systems and undertake tax management manually or in their heads! This can result in hefty amounts being owed either in income tax, employee related taxes or VAT, as the money gets spent on other things and the tax bills begin to come in thick and fast. At Burton Sweet Corporate Recovery we have corporate recovery tax specialists who can help you with this.

4) Financial problems, for instance a sudden loss or withdrawal of capital or funding. It is not uncommon for banks to recall lending in today’s economic climate. A classic example of this was the recent recall of a major bank from the famous chef Gordon Ramsay, who was forced to close restaurants. The inability to secure new capital when it is needed can often also result in company bankruptcy, as can cash flow difficulties – for example if outgoings remain the same or increase and a handful of major clients default on payments because of their own financial adversity.

If you think your business may be at threat from any of these factors, why not give Burton Sweet Corporate Recovery a call and benefit from our specialist corporate recovery and insolvency advice – it could save your company, your pride and all the hard work and cash you have invested in your business over the time you have been in business.

Official statistics from the Insolvency Service revealed that during 2011, there was an increase of between 2% and 4% of businesses going into liquidation, when compared to the year before. The figures for UK businesses were in contrast to that of individuals. Data showed that during 2011, there was a significant drop in individual insolvencies, which varied between 1.7% and 15.5% throughout the year. It seems that the economic downturn and uncertainty of recent years has taken its toll more heavily on companies, as the public strive to get on top of their personal finances. It shows that many individuals have simply had to make some tough decisions when managing their money during a period of time when inflation has soared over earnings increases and taxation is at an all time high. In situations like this you often expect cases of insolvency among the general public to go through the roof. There has been a lot of private and government debt and insolvency advice available to the general public during the tough times and this has obviously been of some help.

One of the cofounding economic issues of individuals getting on top of their finances and curbing spending, is that for businesses who rely heavily on consumer trade are affected further still. Business slows down and the chances of them recovering is quite slim, unless their business model can be tweaked, the economy recovers (which often takes time) or the business has other revenue or equity  to see it through the blip.

Statistics reveal that there are certain business types that are more venerable and at risk from insolvency. Smaller businesses, in particular those outside of the generally speaking more affluent South-East, are at greater risk of failure and therefore more likely to require corporate recovery. For any company worried about the risk of insolvency or even if you would like advice on how you can avoid hitting financial trouble during times of economic hardship, speak to the insolvency advice experts – Burton Sweet Corporate Recovery.