Corporate insolvency advice from Burton Sweet Corporate Recovery – how we will improve your chances of survival.

When any company is in financial difficulty and needs insolvency advice, it’s vital that advice is sought at the earliest possible stage. The earlier that Burton Sweet Corporate Recovery are brought in, the greater the prospect of finding a solution that will enable the business to survive; rescuing your business is always our first objective. We start by ensuring that we understand the reasons for the difficulties and seek to remedy them.
We’ll work with you to manage your cash and working capital, and to deal with the needs of key stakeholders such as bankers and major creditors. Then we work with you to identify and address the causes of financial under-performance and develop a strategy to bring about improvement.
If necessary we can use formal insolvency procedures such as administration or a company voluntary arrangement to provide protection from your creditors and negotiate legally-binding compromises. Even where the financial problems are insuperable and recovery is not viable, we’ll find the most suitable solution which provides the best outcome for all concerned, maximising the outcome for creditors and minimising the exposure of guarantors.
In some circumstances, it may even be possible for the existing management to be involved with the business in the future.
We offer advice that is honest, transparent, competent, respectful and jargon-free, we don’t want to confuse you any further, we simply want to make things as simple as possible during what is always a difficult and challenging time. Here is our mini insolvency advice dictionary, to help you understand the meaning behind some of the terms you may already be hearing or seeing in correspondence:
Administration: Where we act as the insolvency practitioner, managing the business affairs of the company.
Voluntary Arrangement: Advising and drawing up a full or partial repayment agreement with creditors.
Receivership: Realisation and distribution of a company’s assets acting on behalf of secured creditors.
Voluntary Liquidation: Winding up the company when the Directors and shareholders have recognised its insolvency
Compulsory Liquidation: Winding up the company which has defaulted when a court has decided it can no longer meet its obligations.
Dissolution: Handling the winding up of the company when it no longer has a trading future.
Refinance: Examining the options of seeking financial help and facilitating in order to continue trading.
Individual Voluntary Arrangement (IVA): An (IVA) avoids the stigma of bankruptcy and is a powerful tool in dealing with personal debts.
Bankruptcy: Filing for bankruptcy on behalf of an individual and assisting with formal negotiations with creditors.
The Burton Sweet Corporate Recovery team has vast experience in providing discrete insolvency advice, with a successful track record in handling assignments. From the smallest to the largest, from the straightforward to the most complex, across a wide range of industries and sectors, we guarantee there is way out, get in touch today, don’t put it off until tomorrow contact us today!

A Small Victory for Directors over HMRC

There is some – at least, anecdotal – evidence that HMRC have recently been making much greater use of their powers to make directors personally liable for the national insurance debts of their failed companies.   The power derives from section 121C of the Social Security Administration Act 1992, which allows HMRC to issue personal liability notices (PLNs) when a company has failed to pay NI contributions and that failure is “attributable to the fraud or neglect of one or more individuals who were, at the time of the fraud or neglect, officers of the company” (known as “culpable officers”).

“Fraud” is defined as falsification with intent to deceive.  The generally accepted definition of “neglect” is that laid down in 1856 in the case of Blyth v Birmingham Waterworks Company as “the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a reasonable and prudent man would not do.  The defendants might be liable for negligence, if, unintentionally, they omitted to do that which a reasonable person would have done, or did that which a reasonable person taking reasonable precautions would not have done”.

Mr O’Rorke had been the finance director of a company called L Wear Limited, which went into administration in March 2007 owing HMRC £321,307 in unpaid NICs.  HMRC duly issued a PLN against him, and he appealed the PLN claiming that he had been suffering from an addiction which affected his behaviour.

In his defence he relied in part on the comments which had been made in the House of Lords during the passage of the legislation, where Lord Haskel had said “the investigation of each director’s responsibility will be carried out so that only those shown to have acted knowingly and deliberately will be penalised”.  Mr O’Rorke claimed that this meant that it had been envisaged that a defence that a director did not know what he was doing (for example, because of incapacity caused by mental illness) could be used, a defence which would not be available if applying the strict Blyth v Birmingham Waterworks definition.

The Tribunal noted that section 121 is contained within a part of the Social Security Administration Act which deals largely with criminal offences.  It concluded that the purpose of the provision – to transfer a liability from the company as employer, to its officers – was a form of punishment.  It decided that the context of the word “neglect” within the legislation reinforced its view that it was a penal provision, especially when used alongside the word “culpable”, and that under European human rights law the PLN provisions should be classified as criminal.

Taking all those things together, the Tribunal found that the state of mind of the individual against whom the PLN forms an essential ingredient of assessing liability.  A full transcript of the Tribunal’s decision can be found at BAILII. How wide the application of the decision will be, remains to be seen.  For now though, let’s toast a small victory for the little man against the might of HMRC.

We’re grateful to Reynolds Porter Chamberlain LLP for bringing this case to our attention.

Burton Sweet Corporate Recovery offer corporate recovery and insolvency advice, with an approach tailored to suit your specific needs.  We can find a solution for your problems.

Misleading Creditors Might Not Be a Good Idea!

If you’re chasing recalcitrant company debtors this may be a useful case to have up your sleeve.  For directors of debtor companies it’s a clear statement that they can’t simply disregard their creditors and hide behind the security of the limited liability of their companies.

The rule that a guarantee for a debt must be in writing can be traced back to the Statute of Frauds Act 1677.  However that rule was circumvented as the result of a case in 1789 (Pasley v Freeman), which decided that if someone fraudulently represented that another was creditworthy, then that representation could form the basis of an action.  Unsurprisingly the Courts became clogged up with allegations, sometimes true but often not, that such fraudulent representations had been made.

To address that problem, along came the Statute of Frauds (Amendment) Act 1828, usually known as Lord Tenterden’s Act.  Section 6 of that Act said that someone can be personally liable to creditors for deceit if they make a representation to another person, in order to obtain credit, which is fraudulent.  However, the representation must be in writing and signed by the person to be charged.   So imagine the surprise of Mr West and Mr Phillips when the Court of Appeal found them personally liable for their company’s debts to Roder UK Limited even though they had put nothing in writing (Roder UK Limited v West and Phillips).

Messrs West and Phillips ran a marquee hire company called Titan Marquees Limited.  Titan had done business with Roder, a wholesale supplier of marquee equipment, over several years.  In March 2007 Roder instructed a debt recovery firm who threatened proceedings.  Titan made an agreement with the recovery firm to repay the debt by monthly instalments of £1,000.  After three months they realised that repayments at that level were unsustainable, and reduced the figure to £500.  Even those payments petered out after a few months.

In March 2009, Roder’s office manager contacted Mr Phillips who explained that there was an insurance claim pending and that once the payout was received the payment plan would be resumed.  In fact, there was no insurance claim.
Some while later, the managing director of Roder spoke to Mr West, who said that Titan was selling up at the end of the trading season (marquee hire is a highly seasonal business) and that all debts would be paid off out of the sale proceeds.  In fact, there was already a contract in place to sell the business and there would be no further capital payment.

In May 2010 Roder finally issued proceedings against Titan for the outstanding unpaid invoices, and against Mr West and Mr Phillips in the tort of deceit.  The basis of the claim against the directors was that, as a result of their representations, Roder had delayed issuing proceedings and had refrained from exercising their rights under the retention of title clause in their terms of trade.

The Court agreed with Roder.  Mr Phillips’ representation about the insurance payout was false, and he knew it; Mr West’s claim about the business sale was reckless and without regard to the likelihood of Titan being able to meet its debts in full.  They could not rely on section 6 of Lord Tenterden’s Act because the representations were not made to obtain credit or goods.  The credit was already obtained, and that it had been extended beyond the 30 days’ contractual term was hardly with the consent of Roder once the payment plan broke down.  There was no chance that, in 2009 when the representations were made, Roder would supply further goods.  So the directors had to pay up even though they had put nothing in writing.

See BAILII for a copy of the transcript of the judgement in this case.

Burton Sweet Corporate Recovery offer corporate recovery and insolvency advice, should you require it. For more information please contact a member of our highly knowledgeable team for further information.

More businesses set to need corporate recovery assistance as Euro zone debt crisis heightens

Since the credit crunch of 2008 corporate recovery amongst UK businesses has become common place. British banks have been accumulating equity stakes in hundreds of ailing companies they have lent to. It’s a trend that looks set to end with disastrous consequences for many businesses.

With economic conditions worsening across the euro zone, banks are pulling back their support from struggling companies, putting many more at risk of administration and leaving lenders themselves facing hefty losses on loans.
‘It seems they would rather put the businesses into administration and get back what they can. One year ago they might have taken a punt on the equity,’ said Paul Daccus, principal at private equity group Sun European Partners.
The forced sale of Luminar, the former London-listed night clubs group, is a sign of the mood. The owner of the Oceana and Lava & Ignite clubs was put into administration in October, when its lenders Barclays, Lloyds Banking Group and Royal Bank of Scotland cut credit lines. A sale last week will lead to them only recovering a fraction of their loans. Corporate recovery advice may have helped this company get over this credit line issue but like many companies the signs were ignored and it was left too late.

Some of the banks argue their approach to handling distressed companies hasn’t changed; it’s more that the economic conditions are gloomier.
‘If we can see a route back to value we will always back ourselves to do that. That hasn’t changed. What has changed is that we are in a very uncertain business environment which makes forecasting with any accuracy extremely difficult,’ said Graham Rusling, head of credit risk and business support at Barclays Corporate.

With the path to corporate recovery looking longer and trickier to read, banks run the risk of holding companies for longer. Higher costs for holding equity that will come under Basel III regulations are also acting as a severe disincentive for banks to take control, or to plough more money into the companies they already hold. It all strengthens the argument for banks getting out earlier if they can.

If your company has concerns over revenue streams or credit lines being cut and you see this a ‘real’ threat to your business, then you must act immediately because it can quite literally happen over night and a back up plan through sound corporate recovery advice, could be the life or death of your company. Think about it as going to see the doctor when you get symptoms of a heart attack, instead of waiting for the heart attack to happen. For more information on how Burton Sweet Corporate Recovery can help your business please contact us.

Don’t wait until you are in deep water to get insolvency advice

A business may need insolvency advice or be considered insolvent if it doesn’t have sufficient assets to cover its debts, or it is unable to pay its debts as and when they are due. If you monitor your businesses actual performance against your budget and the cashflow forecast regularly, this will give you an early warning of potential problems. You can then take action to avoid insolvency.

At Burton Sweet Corporate Recovery we would prefer it if nobody had to go through the pain of insolvency, that’s why we offer insolvency advice guides that provide information on how to reduce the risk of insolvency, by suggesting avoidance actions to take. Don’t wait until it happens; take some of our recommended steps to avoid it. Keeping cash flowing into the business is a challenge for many small companies. There are several ways to improve your cashflow situation:

Bill promptly – invoicing promptly and regularly helps ensure a steadier flow of cash into the business. Negotiate regular payments across the life of any long-term contracts.

Avoid overtrading – don’t continue to accept orders and try to fulfil them if you don’t have enough cash or resources to do so.

Recover debts – chase up any debts owed to you.

Trim your inventory – excess inventory ties up your cash. Take the time to plan a stock reduction programme.

Renegotiate your credit limits – adjust payment dates and credit limits with your main suppliers.

Factoring – sell outstanding invoices to a third party, known as a factor. Factors pay some of the debt off in advance of collection.

Sell suplus or underused assets – raise cash by selling under-utilised assets and then leasing them back. However, you must sell the assets at their true price and check whether the sale will result in a profit or a loss.

You can also approach your bank to discuss the possibility of extending your finance. Try not to worry the bank unduly, as they could call in any overdraft and make matters worse.

These are just a few small steps you could take on a regular basis. Talk to Burton Sweet Corporate Recovery for more in depth insolvency advice, corporate recovery advice and discuss how you can keep your company’s balance sheet healthy and avoid insolvency.