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LLoyds Banking Group to cut number of suppliers

Lloyds Banking Group have announced 15,000 job losses by the end of 2014 which is obviously very difficult on those who will have to be made compulsorily redundant. 

However, There is also troubling news for Lloyds' suppliers, since - as part of the plan to take £1.5bn of annual costs out of the bank - it is reducing the number of businesses that provide goods and services to it from 17,000 to less than 10,000.  This is likely to hurt the smaller businesses that supply the bank.

With public sector strikes on today and Greece in trouble,  it looks as if the lending boom and subsequent bust is having a delayed effect which was not originally envisaged!

Late Payments! How to improve debtor collection

As many readers will know a business can be making lots of profits, on paper, but can still fail if they don't collect cash.  The converse is also true in that some business are making losses but still have lots of cash.  Mind you, these tend to be large companies with lots of funding and/or profits from previous years.

So what can we do about it?  You need to collect in the debts!  It sounds obvious but we see lots of companies that are owed money and have allowed debts to build up.  Often the management have always felt comfortable with their clients slow payment in the past that it became expected and then they stopped paying altogether.

In these tough times you need to get in the cash!  or you could face insolvency and go into liquidation

Please look at our updated page on debt collection and late payment

TJ Hughes to go into administration (update)

Update 30/06/2011;
Liverpool-based department store group TJ Hughes has appointed Tom Jack and Simon Allport at Ernst & Young as joint administrators.

Previously we said;

TJ Hughes, the department store, is the latest retailer to seek protection from its creditors by filing an intention to appoint administrators within the next 10 days.  We do not know who the administrators are at this stage but it is understood it could be Ernst and Young.

The department store is based in Liverpool, has 57 stores and employs 4000 people.  Earlier in the year it was reported that credit insurance was refused to its suppliers and so the firm was bought out by management from its private equity owner Endless.

This is another sorry tale of a retailer failing.  However, it does appear that consumers really are now cutting back spending quite hard as opposed to just talking about it.   The government needs to think of a way to stimulate growth in the economy as another way of reducing the deficit.  Consumer spending, investment, and confidence are all part of the mix!

Birmingham Hyatt Hotel in Administration

One of Birmingham's landmark hotels, The Hyatt in the city centre, went into administration on Friday.  The administrators are Ernst & Young and they said in a statement that the hotel will continue to trade as normal while a buyer is sought.  According to reports, it is understood that the owners, the Bhatia family, who own the Waldorf in London, also in administration, will look to buy one or both of the hotels back from the administrators.

Of course, the Bhatia family will need to pay the market price for the hotels otherwise they would fall foul of s238 of the Insolvency Act - Transactions at an undervalue. 

The Birmingham 24-floor hotel has 319 rooms and sits next to the International Convention Centre and Symphony Hall.  It hosted the Tory Party Conference last October.

Jane Norman in administration?

Again I find myself blogging on another retailer likely to go into administration! Jane Norman. It doesn't have to be this way.  I know that sales have fallen on the high street in May and June but early action can avoid a more expensive administration process.  A CVA has much the same powers as administration for unsecured creditors.  However a secured creditor such as bank has the power to appoint administrators.  So of course we cannot comment on individual cases.

According to Accountancy Age  Jane Norman is likely to be sold in a pre pack administration with Zolfo Cooper lined up as administrators. 

Jane Norman employs 1600 people and it closed its 90 UK stores over the weekend.

We have already taken  calls from worried suppliers this morning. If you are a supplier please look at our pages for suppliers

Dolphin Bathrooms to enter administration ( Deposit Update)

Update 7/07/2011;  It looks like the customers of Moben Kitchen and Dolphin Bathrooms who paid cash deposits are set to lose all of it as the administrators at Deloitte have been unable to find a buyer.  Those who paid by Debit Card and Credit card should get their money back.

Previously we said;
The owner of Dolphin Bathrooms, Homeform, has announced that it intends to go into administration.  The company owns other well known brands such as Kitchen Direct, Moben Kitchens, and Sharps Bedrooms.

The firm has 160 showrooms across the UK and employs 1300 people.  The firm has said that it is hoping to sell the Moben Kitchen and Dolphin Bathrooms.

Deloitte are the administrators for Dolphin Bathrooms and any queries from customers should be directed at them. We are not able to answer specific enquiries on the phone as this blog is for information purposes only. If your business is struggling as a result of the administration by all means call.

Moben Kitchens in Administration ( deposit update )

Update 7/07/2011: Moben Kitchen and Dolphin Bathroom customers who have paid their deposits in cash or set to lose all of it.  The administrators at Deloitte have said.  This amounts to 453 people whose deposits are worth £1.5m.  Should a deposit protection scheme be put in place for major household purchases??

Previously we said
Moben Kitchens is to enter administration. BBC Breakfast news covered the story today saying it will close and all jobs will be lost. We suspect that that is a  bit premature and that some parts of the business may be saved or sold. But until the formal appointment of an administrator we will have to wait and see.
Update 4pm

Deloitte are the administrators for Moben Kitchens and any queries from customers should be directed at them.  We are not able to answer specific enquiries on the phone as this blog is for information purposes only.  If your business is struggling as a result of the administration by all means call.

Habitat stores in administration

Habitat has put 30 of its stores into administration with the other 3 in central London being sold to Home Retail Group, the owners of Argos and Homebase.  The deal is reported to be for £24.5m.

Habitat has said that the 30 stores would continue to trade as normal for 6 months while the administrators conducted talks with potential purchasers.

The company has said that it has found the retail environment very challenging and in a statement it said; "A return to profitability for the business in the UK appears unlikely in the near term as many of the stores are expensive and poorly located for a furniture retailer,"
It also promised to fulfil all existing orders and protect customer deposits.  This is good news as other retailers have not been in a position to do this.

So our earlier blog of crunchtime for retailers has been borne out by events....
If you are a struggling retailer see our page on how a CVA can help.

Can I sell my company's assets prior to a liquidation

Can I sell one company’s assets to another of my companies and then put the former into liquidation.

This sounds tempting, especially if you sell them at a knock down price to the other company. But this action may be a breach of s238 of the Insolvency Act 1986 – Transactions at Undervalue.

It sometimes happens that directors overlook or even fail to disclose all the company’s property to a liquidator. Consequently, the Insolvency Act 1986 gives a liquidator wide powers to assist his/her investigations into a company’s affairs in order to maximise creditor’s interests.

s238 section applies in the case of a company where -

(a) the company enters administration or (b) the company goes into liquidation and "the office-holder" means the administrator or the liquidator, as the case may be.

Where the company has at a relevant time (typically 2 years if a connected party and 6 months if an unconnected party) entered into a transaction with any person at an undervalue, the office-holder may apply to the court for an order under this section, the court shall, make such order as it thinks fit for restoring the position to what it would have been if the company had not entered into that transaction. So the COURT can reverse that sales or movement of assets. This is what is known as an “antecedent transaction” i.e reversible.

Secondly, this could lead to a negative report to the DBIS and possible wrongful trading.

So how can I sell assets to another company and ensure that any transaction is not reversed?

In order to avoid a claim that you have transferred the assets at an under value then you need to get them valued professionally. It is best to get a RICS approved valuer who will value the assets, assuming a forced sale, and then you can bank the consideration so as to maximize the return to creditors.

If you are interested in selling assets as a result of creditor threats then have a look at our partner site.

Make sure that you keep careful records of any such transactions and ideally ensure that it was approved at a board meeting.

Carrying out these steps will leave you less open to claims of wrong doing

What if you cannot afford to buy the assets?

We suggest that you put the company into liquidation and then offer to buy the assets over time (deferred consideration) from the liquidator.

If you are worried that selling assets to connected parties or other companies that you might control then get in touch and we can help advise you on the matter.

Pre Pack Administration Reform

In draft proposals to be published this week by the insolvency service all creditors will get 3 days notice of any intention to sell the business to a connected party.

It has been argued before that this is an attempt to reform the system in order to stop the occasional "dodgy deal", or as a PR exercise, that will destroy the rescue culture and put jobs at risk unnecessarily.

The principal aim of administration, as enshrined in the insolvency act, is rescue.  In many instances publication of the fact that the business is in serious difficulty can make a bad situation worse as customers and suppliers pull custom and credit. 

The outcome of this reform, if it goes ahead, will send a clear message to directors of struggling companies that they must take advice early and work with turnaround experts to put a rescue in place before a winding up petition forces their hand.  A CVA is a powerful rescue tool that should not be overlooked.

Take the insolvency test to see if you need to talk to someone.  Sales and profits can be high but you can still be insolvent if you cannot pay your creditors when they fall due or your liabilities are more than your assets.
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