News

Bury FC Delay CVA despite Winding Up Petition

in News What is a CVA (Company Voluntary Arrangement)?

Manchester based football club, Bury FC, have requested more time for them to consider a rescue plan. The newly promoted club are experiencing financial difficulties and received a winding-up petition from HMRC, due to unpaid debts, adjourned at the High Court in June, for what would be the third time in a few months. The club were given six weeks to sort out their future. Steve Dale, owner, was encouraged to use the insolvency mechanism of a Company Voluntary Arrangement, to settle the club’s hefty debts. He, himself stated in April, that the club’s financial situation was ‘’significantly worse’’ than he thought, when he took over. Only yesterday (9th July), during a meeting with the Giggs Lane Club’s creditors, was the CVA decision postponed for a further six weeks. Despite their promotion to League One last season, if creditors agreed to the deal, the Shakers would face a 12-point deduction. Inquesta Corporate Recovery & Insolvency are the potential supervisors for the proposed CVA. The director, Steven Wiseglass said: ‘’The creditors have adjourned their decision pending further negotiations and are scheduled to meet again on Thursday 18th July. We continue to work closely with the club, its director and the creditors to try to ensure a successful outcome.’’ Additional to the financial issues, Bury FC have been in dispute with Manchester City, who are to serve them a notice to leave their Carrington Training Ground. Manchester City allowed the Shakers to use their training ground since 2014, when they moved into a new City Football Academy. According to Manchester City Bury FC have failed to meet their obligations in the deal, regarding maintaining the buildings and pitches and numerous break ins have occurred. Once the notice is served, City would allow Bury until October, to find an alternative training facility. What is the future going to be like for Bury FC? Will they be rescued? Or will they face further challenges? What do you think? Comment below…

Read
Bury FC Delay CVA despite Winding Up Petition
closing shop

Retailers increasingly turn to CVAs to restructure their businesses

in News Research and Statistics Retail What is a CVA (Company Voluntary Arrangement)?

UK High Street flagging as retailers increasingly turn to CVAs Figures from the British Retail Consortium (BRC) show that the UK high street and retail performance is facing difficulty. In 2016/2017 we saw a sharp decline in performance and it has been stressed that this has continued.This has been borne out in the high number of companies entering administration or seeking company voluntary arrangements (CVAs) within the last 12 months.Here, we'll take a closer look at UK high street performance and the factors causing it to suffer. Firstly, What has happened to high street performance in the UK? These are the key statistics from the latest BRC research:Overall year-on-year (YOY) retail sales fell 2.7% in May 2019 (the biggest decline on record!) Food sales dropped for the first time since June 2016, with further declines in clothing, outdoor goods and footwear 1,566 stores have had to reduce rent amounts Retail & Leisure Parks account for a third of all closures in the UK as a result of a CVA, administration or liquidation Nottingham city centre has experienced the most closures through either a CVA, administration or liquidation Birmingham holds the most closures of all UK Urban Areas. They've had 26 rent reductions and 23 closures since January 2018 Of all the Counties, Greater London saw the greatest damage, by far Footfall was down 1.4% on average over the 12 months to March 2018 As in 2016/2017 figures, the South East saw the most rapid fall in footfall There has been 140 closures and only 6 rescues of retail/leisure operators, since January 2018 To date, May 2019, 24 companies have failed, 743 stores have been affected and 31,250 employees have been impacted.How has this affected specific businesses? Several UK high street retailers have hit the headlines after being forced to take action due to falling footfall, including:Select: Closure of 14 stores, despite 50 being earmarked. Additionally, they have requested for a rent reduction L K Bennett: A notice of intention for Administration was filed, leaving 41 UK stores at risk as well as 480 UK staff affected Poundworld: Saw the closure of almost 200 stores, as they faced liquidation Mothercare: 60 store closures with 77 stores having their rent reduced by 17% Toys R Us: Entered administration after failing to find a buyer, having implemented a CVA New Look: Closed 60 stores and cut 980 jobs after agreeing to a CVA Homebase: A CVA vote, left 45 stores to cease trading with 1500 jobs at riskDespite this, six retailers have been saved. See the cases of House of Fraser, Arcadia, Office Outlet, Patisserie Valerie, HMV and Evans Cycles. What's caused this decline in high street performance? Economic and political uncertainty, falling consumer confidence, changing consumer habits and rising inflation have all contributed to the long-term decline of the UK high street.However, the most pressing factors impacting the retail sector in May 2019 were:1. Low Growth OnlineKPMG's UK retail partner, Paul Martin, stressed: “The extremely low growth online is real cause for concern, especially with almost a third of all non-food sales today being made online. This trend has continued to manifest itself over the last year and requires real focus from the retail community.”2. Business ratesIncreased business rates are potentially the biggest single contributing factor when it comes to UK high street performance.Gary Grant, founder of high street toy retailer, The Entertainer commented: "Landlords are being very realistic about their rent, but the one thing that is not negotiable are business rates."[The retail sector] is seeing many stores empty for long periods of time and the biggest issue is that [retailers] can’t open stores.''“Business rates are out of line now with retail turnover. Business rates are the real killer. Any increase in cost where you have flat and declining turnover is going to put pressure on the bottom line.''“The Government just haven’t got it. They need to take some responsibility for the high street’s decline.”Likewise, Helen Dickinson, OBE, BRC's Chief Executive, states how such rates prevent retailers from ''investing in their physical space. We have a broken tax system, which sees retailers paying vast sums of money regardless of whether they make a penny at the till, and yet the Government is failing to act.''With the UK high street continuing to suffer, it pays to know your options as a company boss. Taking difficult yet decisive decisions at the right times will put you in the best possible position to keep your company trading successfully.If you are worried about declining UK high street performance and the prospect of a CVA, contact the experts at Company Rescue today. Take a look at our site for many useful pages of advice.

Read
Retailers increasingly turn to CVAs to restructure their businesses

The most common complaint we hear – Accountants don’t help my company!

in For Accountants News

Our turnaround and insolvency advisors hear many things when talking to new clients but the most common complaint we hear is: "my accountants are useless, we have been asking for management accounts for months", we don't know if we are making or losing money"!.Whilst it is hardly fair to blame everyone else when things go wrong we DO have some sympathy with these views. Often accountants will counter the cry by complaining the client does not provide information on time. So there are faults on both sidesThe real problem is management of expectation. Accountants should not claim they will produce monthly management information (MI) if that is not what they re set up to deliver. If they simply produce annual accounts and tax returns, then all well and good, but don't sell the monthly service if you cannot deliver, this creates ill feeling and is poor marketing for your practice.Likewise directors should not assume, they should specify precisely what they want to be provided with and sign an agreement to deliver their side of the bargain.Well the fact is this is not an ideal world and we still get daily complaints and requests for help. We are not set up to deliver this service, we do turnaround!So the really good news is we have teamed up with The FD Centre to provide a high quality service, ranging from monthly management information provision to acting as a finance director for your business. FDC has 45 accountants with a business background right across the UK.Additionally we have a long term relationship with The Outsourced Finance Department and Insight Associateswho can handle all aspects of bookkeeping through to acting as an FD and "interpreter" for the entrepreneurs amongst you who want plain English accounting help.We are very pleased with these relationships because we often rescue companies only to see them fail when the financial reporting fails. With good MI the problems will be spotted sooner and then the board can act sooner.Banks and investors NEED quality MI to continue to support companies through these uncertain times, so if you are having problems with MI please consider getting proper advice.I strongly recommend both our esteemed colleagues. If YOU NEED good quality financial information get in touch with me.

Read
The most common complaint we hear – Accountants don’t help my company!

Coast Collapse into Administration

in A guide for redundant employees in administration or insolvency situations News Retail

Coast becomes the latest fashion chain to collapse into administration.Last month, Aurora, Coasts parent company, was searching for a buyer, after the business was hit hard from House of Fraser’s recent difficulties.On Thursday evening, staff were told that all of Coast’s 24 standalone stores will close, with 300 jobs at risk.PwC have been appointed as administrators.Upmarket womenswear rival, Karen Millen have brought Coast’s brand, website and concessions, as well as taking on 600 staff. They’re said to be working with the existing management team to continue to grow and develop the new business.  Though this sale gives a firmer financial footing for Coast, not everything was included in the transaction, leaving 24 retail stores behind.PwC director and joint administrator, Mike Denny, states ‘’The businesses had been facing financial difficulties due to structural changes in the retail space and specifically the concession partner market, as well as a softening of demand for occasion wear.’’Coast operate a number of concessions in House of Fraser stores and so faced a multi-million-pound bill following the department stores £90m pre-pack administration sale. They were not the only fashion brand to have taken a hit, with Ted Baker, Mulberry and Quiz also being affected.

Read
Coast Collapse into Administration
Women in a board meeting

UK SME companies run by women are less likely to go bust than companies run by men.

in Directors Duties in Insolvency and their Implications News

UK SME companies run by women are less likely to go insolvent than companies run by men.KSA Group Limited, one of the UK’s leading insolvency practitioners, has researched the UK SME market of over 4m businesses in an attempt to see if there was a gender bias on the board of companies that become insolvent.The study was designed to investigate if the insolvency rate was higher for male or female-run companies.  In the first study of its kind in the UK, companies were investigated to determine the gender of the board of companies that had either gone into administration or liquidation over the last twelve months, to see if there was any correlation between gender and the general financial health of a business.Key findingsInsolvency rate is 70% higher in male run companies 8 times as many companies are run by men than women There is little difference in the industry sectors of companies run by men or run by women Only 12 out of 347 companies that went into administrations were female run.It was found that the insolvency rate of male-dominated businesses was 0.34% and those in female-dominated businesses was 0.20%.  So, the insolvency rate is 70% higher in male-run businesses.  Most interesting was the difference in companies that were likely to go into administration as opposed to liquidation.  Administration is a more complex and costly insolvency mechanism and is more likely to be used on larger businesses which are disproportionally more male-dominated but, the fact being that out of 347 administrations in our data sets, only 12 were female-dominated.What conclusions can we draw from these findings? Robert Moore at KSA Group said; “It is apparent that the insolvency rate is higher in male run businesses, but this may be due to a number of factors that have nothing to do with whether men are inherently worse at running businesses than women.  It may well be that the businesses that tend to be more likely to become insolvent due to the nature of the industry or recent economic events are coincidently run by men.”The study found that only real estate and letting businesses are overly represented in the data set of female-dominated businesses that have become insolvent.  See the pie charts below which have categorised businesses into the established Standard Industry Classification.About the Study For the analysis Robert Moore (Marketing Manager) and Rebecca Dunne (A marketing intern from the University of Hertfordshire) researched Creditsafe’s database of 4m companies in the UK.In order to do the analysis, 4 data sets were collected:A count of all active companies with just 2 men on the board or a majority of 75% of the board that have been actively trading in the last 12 months > 461048 A count of boards containing just 2 women or a majority of 75% of the board that have been actively trading in the last 12 months > 56654 A count of all companies that went into administration or liquidation in male-run businesses as above > 1561 A count of all companies that went into administrator or liquidation in female-run businesses as above > 117Single person directors were excluded as were businesses with less than a 75% gender bias. The thinking behind this was that single director companies are made up of a significant amount of personal service companies that are not small businesses employing people and needing complex financial controls, but rather just a way of paying less tax. In addition, certain rule changes in the last year has led to large increases in insolvency rates of personal service companies to do with allowable expenses.The question of whether male or females are better at running businesses has been researched in America. The researchers found that there was no discernible difference. However, research done after the financial crisis did show that female-run banks were less likely to go bustClearly more studies could be done in this area to see if there really are any gender influences in business failures. Given that many business failures are caused by not acting early enough and not taking advice then the old cliché that men don’t follow instructions or ask for help in many aspects of their lives may just be true in their roles as Directors of companies.

Read
UK SME companies run by women are less likely to go bust than companies run by men.

New Look to use CVA to close 60 stores

in News Retail What is a CVA (Company Voluntary Arrangement)?

Updated:New Look is now considering a CVA in order to close up to 60 stores, which represents 10% of its portfolio, after a very tough year in which UK sales were down 8% on like for like comparisons. 980 jobs are at risk. The South African owned business will need the permission of its bondholders. The plan also includes a rent reduction and new lease terms for 393 of its stores.New Look, which is owned by South Africa's Brait, has asked its creditors to approve the proposal by March 21 and all stores will remain open until then. Deloitte is acting as a nominee to the CVA.It has also been reported that the firm had lost its credit insurance from some of its suppliers that will mean that it will have to pay upfront for its supplies.  This has echoes of many other firms that have gone bust where the failure has been precipitated by the withdrawal of credit insurance.New Look ‎is the latest in a series of High Street names to look at trying to reduce the size of their store portfolios amid rising pressures from online and discount rivals, increased living wage and a deteriorating outlook for consumer confidence.Expensive High Street stores can be cut back provided that the lease allows for early termination.  If not the only way out is to surrender the lease that can be very expensive or use a company voluntary arrangement (CVA).A CVA allows the retailer to determine its lease obligations which can greatly help the company's cash flow.Daniel Butters, a partner at Deloitte, said that the CVA “will provide a stable platform upon which management’s turnaround plan can be delivered”.For more information on why a CVA is a perfect mechanism for helping retailers, read our retailer rescue page Why not read our case study where we rescued a multi-store retailer

Read
New Look to use CVA to close 60 stores

Byron Burgers to Seek CVA As Chain Struggles

in Hospitality News Retail What is a CVA (Company Voluntary Arrangement)?

The Byron Burger chain of upmarket burger restaurants has announced that it will be looking for the support of its creditors by way of a company voluntary arrangement (CVA).  Byron Burgers employs 1800 staff in 70 outlets.  The company is asking for a 55% rent reduction on 20 of its restaurants and to open a dialogue with the landlords regarding continuing trading.This is the latest in a line of businesses such as Toys R US that have been struggling recently and have looked at using the CVA mechanism.    The CVA will allow the company to vacate some of its properties and close its branches which, according to the company, have not performed to expectations.In order for the rent reductions to be binding on the other landlords, they will need the support of 75% by value.  These landlord CVAs are becoming more popular as retailers struggle with high premises costs.Rumours about the business' financial situation have been circulating since September last year when we reported that Byron confirmed it would be closing four of its outlets.Simon Cope, Byron chief executive, said: "Byron's core restaurant business and brand remain strong but the market that we operate in has changed profoundly."In order to continue serving our loyal customer base, we need to make some critical and difficult changes to the size and shape of our estate."CVAs are not popular with landlords as some see it as a way of businesses just dumping unprofitable stores.  However, in order to do a CVA, the company has to be insolvent on one of the 3 tests.  In this case, the business can argue that it is balance sheet insolvent as the ongoing costs and liabilities of the unprofitable stores will make the whole business insolvent.If you are a retailer or hospitality business then a CVA can be a very powerful mechanism to save your business.  See our page on retailer rescue or give us a call on 01289 309431

Read
Byron Burgers to Seek CVA As Chain Struggles

KSA Group Sells Sharda Glass Business in Pre Christmas Pre Pack

in News Pre Pack Administration Process and Procedures

Eric Walls and Wayne Harrison confirm that, acting as administrators, they sold the business and assets of Sharda Glass Limited on Friday 20th December to CCPE Architectural Glass Limited.Sharda Glass is a specialist supplier of flat and coated glass to the construction and industrial sectors. Based in Hayes, Middlesex, the company had been advised by turnaround experts, from KSA Group, since late October 2013.Having grown quite rapidly in the past couple of years the company suffered from a sharp deterioration in its financial position in the last few weeks of December 2013, which put unsustainable pressure on its cash flow.  At the time of its collapse Sharda Glass employed 65 employees.Having looked at the possibility of restructuring the company’s debts through a company voluntary arrangement (CVA) the directors of Sharda Glass and their advisors concluded that a CVA would not be appropriate. Several buyers had approached the company and KSA Group, so a decision was taken to market the business and assets for sale. Consensus Capital Private Equity Limited was the successful bidder and it formed a new company called CCPE Architectural Glass Limited to acquire the assets from the administrators who were appointed on 20th December 2013.Commenting on the sale, Eric Walls KSA Group’s national insolvency director, said, “We endeavoured as we always do, to try and find a non administration solution. However the scale of the debts and the business problems meant that this option was not available. Having sold the business to a well capitalised buyer we managed to maintain 65 jobs for employees, the continuity of the business for its customers and we believe a better result for stakeholders.”Creditors should contact KSA’s Gateshead office on 0191 482 3343 for further information if required.Contact Eric Walls 07787 278527 or Keith Steven 07974 086779 KSA Group Ltd Level 7 Tower 42 25 Old Broad Street London EC2N 1HN 020 7877 0050 www.ksagroup.co.uk www.companyrescue.co.uk

Read
KSA Group Sells Sharda Glass Business in Pre Christmas Pre Pack

Moben Kitchens in Administration ( deposit update )

in A guide for redundant employees in administration or insolvency situations News

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 saidMoben 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 4pmDeloitte 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.

Read
Moben Kitchens in Administration ( deposit update )

Miss Sixty and the “Powerhouse” Principle

in News Property and Real Estate

In our eNews of last week (email me if you wish to receive this monthly newsletter) regarding the Miss Sixty UK Ltd - CVA. See a copy below in italics"Another section 6 application this time not by HMRC but by a disgruntled landlord, called Mourant & Co Trustees.The s6 application is a bid to have the decision of creditors approving the CVA revoked, because the parental guarantor was unfairly prejudiced against.Mourant owns the Liverpool shopping Centre known as the Metquarter, where Miss Sixty and sister brand Energie had stores which were both were on 10-year leases. Crucially each lease was in turn guaranteed by Miss Sixty UK's Italian parent company, Sixty SPA.However, under the CVA proposed by Sixty UK to determine the shop leases, the landlord also lost the parental guarantee. Had the company gone into liquidation, the guarantor's obligations under the lease, ie to pay the rent and charges would have continued. The CVA, however, allowed Sixty SPA to walk away.Similar to the Powerhouse case the court is likely to find that the CVA was not able to unilaterally determine another contract i.e. the parental guarantee, without bilateral concurrence. Watch this case!Our views on CVAs are well known - always ensure that there is concurrence and consensus as much as possible.So, whilst Powerhouse indicates that a parental guarantee cannot be determined by a subsidiary CVA and the Miss Sixty case may vindicate the Powerhouse decision, this determination of a parental guarantee using the CVA as a tool is still possible if done with consensus and an appropriate payment to the landlord by the guarantor."Well it seems I was right on both issues; the court DID find for the plaintiff and the CVA was rejected because it was unfairly prejudicial against the landlords. Interestingly though, the judge stated that the compromise of a landlord's claim against the guarantor of a tenant debtor - also known as the Powerhouse principle - IS a valid legal mechanism within a CVA, as long as the compromise is not unfairly prejudicial.In a judgement that was critical of the nominees and supervisors of the Miss Sixty CVA, Hollis and Nick O'Reilly, then of Vantis PLC, who proposed a CVA as administrators of Sixty UK Limited, Justice Henderson found that a landlord could have been crammed down in this way, but was in fact unfairly prejudiced (Mourant & Co Limited Trustees and another v Sixty UK Limited (in administration) and others). The CVA was set aside.The judgement concludes: "I am conscious, of course, that I have not heard the administrators' side of the story, because of their decision not to participate in the trial. Nevertheless, I am satisfied that there is a prima facie case of misconduct on their part which ought to be considered by the professional bodies to which they are answerable. I therefore propose to direct that copies of my judgment should be sent to the appropriate bodies by which they are licensed to act as insolvency practitioners."This is something that the IP's regulator will have to consider carefully.However, the main point for landlords is that the case yet again underlines that CVAs are an enormously powerful tool that can compromise a lease and indeed, if properly prepared, may compromise personal and parental guarantees.

Read
Miss Sixty and the “Powerhouse” Principle

New Case Study Rescuing Leveraged Buy-In Managment Buy-Out Company

in News

"We have a failing company whose investors have invested £1m, plus £7m of loan notes. HMRC is threatening to wind up the company for unpaid VAT and PAYE".So started a conversation with a distressed company director with Keith Steven. After 20 minutes we established the following position.1. The company had a turnover of £4.4m in the last 6 months. Its had previous year sales of £8.9m.2. Trade creditors amount to c£506,000.3. Inland Revenue was owed c£834,893 for PAYE and NIC, various time to pay (TTP) deals had been agreed and reneged upon owing to cashflow pressures.4. VAT was owed approximately £45,000.5. Investors funded the MBO that formed the group holding company. Investors had provided loan notes of £5.3m, interest has been accruing and interest stood at £738,365. Directors/shareholders had provided a further £808,000 of loans and interest was accruing as above.6. The Bank was owed £550,000 on a term loan. It also provides an overdraft of £150,000 to the Group Holding Company. Currently the bank overdraft was standing at £216,000 (nominally). The bank held a debenture with a fixed and floating charge on all monies due from both companies on a charge created 17th November 2006.Invoice discounting was provided by the same bank. The current facility provided for 85% initial payment. Overall the facility provides an advance of £1.091m. The debtor book was currently £1.329m.Our caller wanted to know how to stop a winding up petition, how could KSA reorganise the business such that the venture capital backers / loan note holders did not take a complete bath and so that he could invest some money in a recovery whilst removing non performing directors and management. Not an easy challenge!Given the acquisition had been driven through a "whitewash" procedure to avoid breaching the Financial Assistance rules (s151-153 Companies Act 1985) , the inter company position was that Holdings owed trading co some £700,000. This was never going to be recovered because the only value that Holdings had was 100% of the equity of trading co, it was insolvent and about to enter a administration! Secondly, the loan notes and equity investment were at risk if the trading co entered administration or pre-pack Administration.We considered pre-pack administration but the bank was not keen on that option nor were the VC investors or the loan note holders (the director was the largest loan note holder). So a company voluntary arrangement seemed the logical answer for the trading company.To find out more about the innovative solutions that resolved all these seemingly conflicting interests for the VC investor, loan note holders, the bank and invoice discounter, new management and the new investment see this new Case Study here - Leveraged Buy In Management Buy Out".If you are a venture capital or private equity investor with troubled clients, call Keith Steven on 07974 086779 or Eric Walls on 07787 278527.

Read
New Case Study Rescuing Leveraged Buy-In Managment Buy-Out Company