By entering Administration, Rangers have given themselves protection designed to provide them with breathing space to make a decision as to the best way to proceed in order to ensure the long term future of the Club.

Potential Company Voluntary Arrangement

Via Administration, Rangers will be able to make a proposal to its creditors, principally HMRC, to repay a percentage of its debt via a Company Voluntary Arrangement, or “CVA”.  Typically this will involve a commitment of between 3 to 5 years, during which time they will endeavour to make regular payments to their creditors via the Arrangement, under the supervision of Licensed Insolvency Practitioners.

As a consequence of such an offer, which will be sold on the basis that it gives a better return to HMRC than the alternative of liquidation, Rangers will be able to effectively write off a large proportion of its unsecured debt.  With the debt to HMRC, subject to the resolution of an ongoing Court case, estimated at a potential £75 million this step will allow Rangers to become a much more competitive force.

Alternative of a Fresh Start

If HMRC reject the CVA it is quite likely that the Administrators will see it as an acceptable alternative to sell the “business” of Rangers to the highest bidder.  This option would in fact make the playing field in Scottish football even more unbalanced in favour of Rangers as they would essentially start afresh as a new company without the burden of any debt to HMRC, basically giving them a £75 million advantage over their rivals who, presumably, have been paying their taxes on time.

Right Advice at the Right Time

This situation highlights how businesses, given the right advice at the right time, can extricate themselves from seemingly insurmountable debt and rise from the ashes to ensure the best possible chance of future success.

We at liquidation.co.uk, as Licensed Insolvency Practitioners, are happy to offer free, confidential advice to owners and directors of struggling businesses, designed to ensure the best possible outcome.

If you would like to take advantage of this service, please call on 0800 054 6589.

In the 3^rd quarter of 2011 there were on average approximately 1,400 companies per month being placed into liquidation.  Just over 70% of these were instigated by the directors themselves through the process of Creditors’ Voluntary Liquidation.  The remainder were forced into Compulsory Liquidation, with HMRC proving the most likely to issue a Winding Up petition.

Statistics are due out in early February for the final quarter of 2011 and I would be surprised if these numbers show any sign of abating.

The CBI’s Chief Economic Adviser, Ian McCafferty, stated that “Consumers are still holding off particularly from buying big ticket items like washing machines and fridges.  Online and mail order sales were the only areas that performed well in January, but growth was still down on last month”.

Insolvency Enquiries Increasing

At liquidation.co.uk we are certainly seeing an increasing number of enquiries from directors of limited companies who are feeling the pressure.  With HMRC seemingly taking a more aggressive stance and showing a reduced willingness to enter into time to pay agreements, customers stretching out credit terms wherever possible and suppliers increasingly keen to rein in credit, directors can feel themselves stretched in all directions with genuine concern about their ability to cope.

Self Fulfilling Prophecy

Most economists agree that consumer spending is the key to reinvigorating the economy.  However, with interest rates on savings now negligible, rather than spending the money in their pockets, those who are lucky enough to have surplus income at the end of the month are using this to pay down debt.

This is principally as a result of a fear of what’s around the corner.  During the decade prior to recession we were all encouraged to take out relatively cheap credit and spend.  Now, having learnt the dangers of such a philosophy when the collapse of the banking sector took us from boom to bust, both consumers and lenders alike are reluctant to take the same risk again.

With headlines emphasizing the likelihood of a double dip recession, and unemployment on the increase, even those in work are reluctant to spend for fear that their jobs are not as secure as they might be.  Whilst pre-recession most would have been confident that any period of unemployment might be brief, now more and more of us are feeling the need to pay down our debts and put some money aside to guard against their being too many rainy days in the future.

Therefore, with consumers reluctant to spend for fear of the continuing economic downturn, the economy continues to struggle.  Call it what you will – Catch 22, chicken and egg, a self fulfilling prophecy but ultimately this fear of recession is perhaps in itself the single biggest contributing factor to the double dip recession, and increasing number of liquidations, which seems to be heading our way.

Save your business

If your business is under pressure, we at liquidation.co.uk are available to help and advise.  As Licensed Insolvency Practitioners we at liquidation.co.uk are able to call upon range of procedures which can assist directors in surviving;   whether that is with the existing company via options such as Company Voluntary Arrangement, or via a restart through a pre-pack Administration or liquidation.

Please call us on 0800 054 6589 and we will be happy to discuss any problems your business may be experiencing, with no charge for the initial conversation.

During this period of unprecedented economic pressure businesses find themselves facing contracting markets, increasing competition, decreasing profit margins and potential bad debts. This comes at a time when lenders are refusing to extend facilities or consider additional investment leaving businesses struggling under a burden of historic liabilities.

This can often lead to directors feeling frustrated and unsure of their options as they struggle to see a way to fulfil the businesses full potential.

At liquidation.co.uk we have over 35 years experience of advising and assisting SME and owner managed businesses on their options and assisting them through these difficult times in order to fulfil their full potential.

Seek professional advice – there is light at the end of the tunnel.

Often a business may have genuine reason for optimism for its future trading performance but, due to the level of historic debts owed by the business, the directors fear they can’t survive long enough to fulfil its potential.

In such circumstances a Company Voluntary Arrangement can provide the perfect opportunity to restructure the historic debts allowing the business to concentrate on the future success and growth.

What is a Company Voluntary Arrangement?

A Company Voluntary Arrangement is a formal process governed by the Insolvency Act 1986 which allows a Company to make a proposal to its creditors to repay the outstanding debts over an extended period of time and stops the creditor pressure growing.

The Company Voluntary Arrangement can allow for both an extended repayment period and a reduced level of repayment below the full amounts outstanding to creditors.

The proposal will ordinarily be based upon an affordable monthly contribution from future profits with the amount to be paid being based upon a cash flow forecast prepared with the assistance of a Licensed Insolvency Practitioner at liquidation.co.uk

The Company Voluntary Arrangement will allow the Company to survive its existing liabilities and continue to trade safeguarding existing contracts and retain employment for existing staff.

Do not delay?

The earlier that advice is obtained the wider the options will be for the directors and the sooner creditor pressure will cease, at liquidation.co.uk we have vast experience in advising on all Corporate insolvency processes, including Company Voluntary Arrangements, and offer a free initial meeting to assess and discuss the options available contact us free on 0800 054 6589 to speak to a qualified insolvency practitioner.

With the current economic climate, warning signs within the business should not be ignored as this could mean that the leap from insolvency to success will shorten.

Taking advice early may mean that liquidation is not the only option available for the company.  At liquidation.co.uk we provide advice on those hard to make decisions.  Business owners should bear in mind that insolvency is not the end of the road but can act as a springboard to future success.

Inability to obtain credit

The downturn in the economy has seen many lenders refusing or restricting their funding to many businesses.

Rising costs and falling demand from consumers has put increasing pressure onto businesses and the refusal of lending from finance companies and Banks has seen many businesses fall victim to the “credit crunch”.

Warning signs of insolvency

 There are two main tests of insolvency, the first being an inability to pay debts as and when they fall due and the second being that the liabilities of the business are higher than the worth of the assets.

The main warning signs to look for are creditors placing a stop on credit accounts, loss of customers with no strategy to replace them, HMRC debt going unpaid or constantly being paid late, business owners putting increasingly more funds into the business and constantly “juggling” the business creditors.

Should any of the warning signs be spotted, businesses need to act early and seek advice.

If problems are found early, the number of options available to the business may be higher.  For example a turnaround specialist could advise and assist to rescue the business either in its current format or in a new structure.

Should you have any concerns please do not hesitate to call on 0800 054 6589.

After a long drawn out review of the current system Ed Davey, Minister for Employment Relations, Consumer and Postal Affairs, has confirmed the thoughts of most of those operating in the insolvency profession.

In a recent statement Mr Davey, speaking on behalf of the Insolvency Service, commented:

“Having taken account of all the issues, the government is not convinced that the benefit of new legislative controls presently outweighs the overall benefit to business”

The current system allows directors of insolvent companies, with the aid of a licensed insolvency practitioner, to close down an ailing company and, often with the same directors and management in place, take the business forward through a new limited company without the burden of debt.

Pre-packs are all about perspective

From the Directors perspective the current system offers a fantastic opportunity to continue a business which may be failing due to historic problems but which, perhaps with minor restructuring, can be profitable in the future.

For the employees part, their contracts will usually be transferred automatically under the Transfer of Undertakings (Protection of Employment), commonly known as TUPE, legislation so it remains business as usual.

The main concerns about the process often come from suppliers who feel that it unfairly allows directors whose companies have failed, to leave them behind and start afresh, often with little or no return to the trade creditors.

Competitors also argue that the “phoenixed” business gains an unfair competitive advantage, being able to start again with a clean slate whilst their rivals continue to struggle on, attempting to pay their way.

Proposed changes unworkable

The main proposal which Mr Davey was understood to be considering would have meant that, prior to the transfer an advertisement would have to be placed, giving interested parties a 3 day window to object to the transfer.

Whilst in principle this may seem a sensible provision, insolvency practitioners have always contended that, in practice this would render the system unworkable and ultimately lead to the closure of more businesses through liquidation.

The argument, which Mr Davey appears to have accepted, is that such intervention would cause disruption to the business, uncertainty for employees, a lack of confidence from suppliers and would also give competitors the opportunity to deliberately scupper the process by prolonging the process further.

Common sense and pragmatism

Whilst the option of continuing a business without paying its debts may sound too good to be true, there are some important points to note.

The process can only take place where the current management, or any interested party, is willing to pay a “fair value” for the assets.

An independent valuer would normally be involved in order to assess and confirm that any such sale doesn’t prejudice the interests of the creditors.

Whilst the Administration does not always offer a great return to creditors, the alternative is normally closure of the business through liquidation which would give no greater return and also have the effect of increasing unemployment and eliminating the opportunity for a successor business which would hopefully be in a position to pay its suppliers and taxes on time.

As the coalition government seeks to end the current climate of low growth, potentially denying businesses the opportunity to be resurrected through pre-pack Administration by increasing red tape always seemed like a backwards step and insolvency professionals are breathing a collective sigh of relief that common sense and pragmatism seem to have prevailed.

Help is available

Here at Liquidation.co.uk we have dealt, in our capacity as licensed insolvency practitioners, with thousands of companies in peril over the last 30 years and have always tried to find the most commercial solution to the problem in hand.

The pre-pack Administrationis just one of several tools which can be employed to give a struggling business the best chance of survival.

The Company Voluntary Arrangement, or CVA, is a solution which, with majority creditor approval, allows the existing company to continue, with the breathing space that many creditors, HMRC in particular, are reluctant to give without this formal protection.

If you would like to discuss the various options which might give a struggling business the best chance of survival please do not hesitate to call on 0800 054 6589.

We’re a long established independent firm of Licensed Insolvency Practitioners.

We have advised and acted for thousands of businesses.

Deal directly with us, so no broker fee to pay.

We deliver what we say, no broken promises from commissioned sales agents or unregulated advisors.

We are fully licensed and regulated.

We’re bricks and mortar, with offices nationwide and 25 staff. We have 5 licensed insolvency practitioners who are also Directors of our firm.

We’re a second generation business so understand owner managed and family businesses.

We’re all aware of what competition is. So we at Liquidation.co.uk are keen for you to get the premium level of service and advice that we offer for what you consider to be the best price.

So if you’re unsure that you’re getting the best deal elsewhere just give us a call and we’ll quickly tell you if you are over paying and wherever it’s possible we provide you with an alternative quote to suit your needs best.

There’s no cost to speak to us and no obligation to take up our quote so what are your waiting for?

If you’re still unsure take a look at our “why work with Liquidation.co.uk?” section or Contact Us for assistance

Your company may be either subject to an application by Companies House to have the company struck off the register or you may be considering using a striking off procedure to bring the life of a company to a close.

Don’t forget that once a Company Strike Off has taken place without going through a formal liquidation procedure it could be put back on the register at any point in the next 20 years.

Could this be the answer that you’re looking for? For some Companies “yes” is the answer.

We’d be happy to discuss how suitable this might be for your unique circumstances, why not find out before it’s too late!

Company Strike Off off may be a solution, that’s why from just £500 plus vat we’ll be happy to assist you with the strike off procedure.

Do please be aware that unlike some other options this is not a guaranteed solution. Creditors may object to the Striking off of the company from the register.

We will be glad to talk you through whether striking off may be a solution for your company and to discuss all the options with you.

Company Administration was first introduced by the Insolvency Act 1986 as a mechanism for protecting companies from their creditors while a restructuring plan is completed. The Administration mechanism was subject to significant changes after the introduction of the Enterprise Act of 2002 which allowed easier access to the process for companies in financial difficulty.

Company Administration can be sought by the company, its Directors or one of the creditors.

A company in administration may continue to trade while a plan is formulated to achieve one of the following:

• Rescuing a company as a going concern, or
• Achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or
• Realising property in order to make a distribution to one or more secured or preferential creditors.

Following on from the legal jargon it’s worth considering some practicalities. Experience shows that there is likely to be some form of business continuation after the Administration, whether it’s within the existing company or a different company.

The likelihood is that a company entering into Administration will either have its valuable assets sold on or leave Administration to go in to a Company Voluntary Arrangement (“CVA”).

The key cost to an Administration process is where the business continues to trade through Administration, not only incurring its operating costs but also the costs of the Administrator’s team.

This is one reason why the concept of a pre-packaged (“pre-pack”) sale has developed. The pre- pack sale is where an off-market sale is lined up prior to the start of the Administration process and then the Administrator is appointed to conduct the sale.

Any such sale must be approved by a professional valuation agent who should take into account all relevant factors in arriving at that valuation. This valuation is a cost of the Administration process.

Where the pre-pack has been questioned is where the sale of the assets is to a connected party rather than a third party. However it is worth noting that such a sale if conducted following the correct procedure does not fall foul of legislation.

Most sales of assets by an Administrator will involve the appointment of a solicitor to prepare the sale paperwork and this again is a cost of the Administration.

A Company Voluntary Arrangement (CVA) is a legally binding arrangement between a company and its creditors to repay them over a period of time.

A Company Voluntary Arrangement may have an element of debt deferral, i.e. creditors are paid over a longer period of time. A Company Voluntary Arrangement may also have an element of debt excuse, i.e. creditors are not paid back the full amount that is outstanding to them.

Either way the offer that is made to creditors by the company will be subject to a vote by creditors as to whether they wish to accept the proposal.

Probably the most important point is that the company continues to trade and the Company Directors remain in control of the company.

A CVA won’t suit all business structures but, why not have a chat with us to see if it’s an option for your Company.

Key Benefits

Enables the company to continue in business with a view to improving the position of the creditors

Stops court action and winding up procedures

Eases cash flow pressures

Directors are allowed to remain

Greater flexibility allowed ensuring that the return to creditors is maximised

If a company has a viable future, but current cash flow problems have resulted in mounting pressure, a CVA may be a good solution.