Written ByKeith Steven
Managing Director
Keith is the Managing Director of KSA Group Insolvency Practitioners which has been established for 25 years. The company has undertaken more CVA led rescues than any other firm. Read our case studies to see how.
I am worried about the creditors’ meeting for my company’s CVA. What should I do to prepare and what is likely to happen? Will anyone attend?
The meeting is chaired by the advisor or an insolvency practitioner (IP). Creditors are sometimes represented by professionals from other insolvency firms if the debt is substantial. The aim of the meeting is to allow the creditors to question the director’s proposals; however it is NOT a place for settling disputes. The creditors meetings are normally held via video conferencing unless 10% or more of the creditors wish it to be held at a physical location.
At the meeting, the creditors will vote on the proposed restructure of the company debts. If there is a majority vote of 75% by value of the total value of unsecured creditors at the meeting (whether in person or by proxy) vote in favour. A second vote, not including connected creditors, is taken and provided that not more than 50% of unsecured creditors vote against the proposal, it is approved. Remember that the bank or other secured creditors are not affected by this process. For an example of votes at a creditors meeting click here
Directors often worry about the creditors meeting.
However, if the work has been done thoroughly and all the creditors are thoroughly informed of what is happening before the CVA is filed at court, then there is no reason for concern.
In practice, it is rare for creditors to turn up. Instead, if they want to vote yes, they are more likely to send in a proxy. In our CVAs, the Voluntary Arrangement Service (VAS) which represents HMRC, will generally be supportive of viable proposals that are well built and show proper care with attention to detail. Given that the VAS often represents the largest votes, then we ensure they are comfortable with the CVA process very early in the cycle of events. However, VAS need to be confident that you are going to comply with your obligations. Therefore a poor record of filing returns on time and indeed even late filing of director’s Self Assessment for tax will dent that confidence. Proper communication with creditors is a vital part of KSA’s strategy for helping you build a CVA deal.
Get on, run the business and make some money. Remember that once the company is in a CVA, the directors have to make it work and keep up any payments to creditors. Two or more failures to pay the dividend will deem the arrangement to be a failure and the company will be wound up. If you are having any problems meeting the payments or there is a change in your circumstances, let the supervisor know as soon as possible. Another creditors meeting could be held with further modifications being put to creditors but be warned they are likely to be less accommodating second time round.
Hadden Construction Goes Into Administration
Hadden Construction, the Perthshire housebuilder established in 1992, has gone into administration with the loss of 66 Jobs.Work on active sites including supported living apartment developments and affordable homes will stop depending on an evaluation of ongoing projects.This week joint administrators Ben Cairns and Jonny Marston from Alvarez & Marsal were appointed to "wind down" company operations.The failure of the company was blamed on rising materials costs and an increase in labour rates.Mr. Cairns said: "Like other contractors, Hadden Construction has been battling a number of headwinds in recent years, including inflated materials prices, rising labour costs and supply chain interruptions.“As administrators, we will seek an orderly wind down of the operations and will welcome any investor interest in the company’s assets.”Mr Cairns added: “We understand that today’s news is unsettling for the company’s employees and will be doing all we can to support them over the weeks ahead.”With a turnover of £30.2 million, the most recent figures for the company for the year ended March 31 2023 show a pre-tax profit of £260,503.Hadden was appointed by the Scottish Procurement Alliance to its £100 million Refurbishment and Modernisation (RM3) Framework in March of this year. Apart from several other public sector frameworks including Scotland Excel's New Build Residential Framework, Wheatley Group, Link Group, Hub East Central, Hub South East and The City of Edinburgh Council, Hadden was already appointed to SPA's Public Buildings and Infrastructure (PB3) Framework and New Build Housing Construction (H2).In addition, it was preparing to replace 20 chalets on a permanent Gipsy Traveller site near Perth, the company signed a £1.9m design and construct contract in April to deliver 10 reasonably priced homes for rent in Newtyle for Abertay Housing Association.Elsewhere, Hadden had worked on a £6.25 million renovation at the Muirhead House student residence at the University of Stirling.The construction industry has the highest insolvency rate when compared to other industries. This is due to a number of factors.Below are some of the common problems we’ve seen happen in the industry: Contract arguments and QS problems. Bad debts. Delays in repayments from HMRC, regarding CIS deductions (which are connected to PAYE scheme). HMRC can be slow in making CIS refunds, leading to issues with cash flow. Time to pay deals with HMRC for PAYE and VAT (where applicable) being too expensive for your cashflow. Losses made on large contracts, where large clients or main contractors slow down payments and sometimes go into administration. Hitting YOUR cashflow. So called “subby bashing”. Issues with sub-contractor non performance or slow completions. Difficult customers, be they private individuals, clients or contractors – who add extra work on and won’t pay extra! Lengthy contracts with material prices agreed at beginning. I.e. quotes do not keep up with rising costs. Especially tough after huge price rises in recent years. Less focus on financial accounts, financial management due to directors and management being onsite. Hard to win new contracts if cash flow is tight, perhaps due to low credit rating. Retention sums not released at agreed times. Suppliers taking legal actions such as County Court Judgments, or even issuing winding up petitions.
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Levantina Goes Into Administration
Operating in Basingstoke and Rotherham, Levantina UK, the stone company, has entered administration citing declining demand in the UK's housing and refurbishment sector as a main cause of its financial difficulties.Levantina UK is the UK distribution division of Levantina Group, a worldwide stone business focused in extracting, manufacturing and distributing stone products including marble, granite, limestone and other natural stones.Mostly buying semi-finished stones in slab form, the company has more than 350 B2B customers from stonemasons and kitchen and bathroom businesses in the UK.Levantina (UK) Limited reported turnover of £5.1 million in accounts for the year ended December 31 2022. But over the same period, its post-tax losses grew from about £538,000 to almost £723,000.Now appointed as joint administrators of Interpath Advisory are Nick Holloway and Stephen Absolom; the wider multinational Levantina Group is not affected by the administration. After the joint administrators were appointed, the company kept its twelve employees."We are working with the business to continue to trade and keep operations running at the sites in Basingstoke and Rotherham, so it is business as usual for staff and customers. The administration provides a period of protection while we explore options for the future of the business in the UK" said Interpath Advisory Managing Director and joint administrator Nick Holloway.The company's assets in its 2022 accounts came out to be just under £3.4 million. But at the time, it owed debtors around £5.8 million, and overall the company had liabilities of more than £2.4 million.
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Remainder of The Body Shop Stores Saved From Closure Amid Administration Rescue Deal
Update as per September 2024100+ Body Shop stores have been rescued from closure following an administration rescue deal by a consortium led by Mike Jatania.Mr Jatania is known a 'Cosmetics King'. The deal came from Aurea, his investment firm.Reports share that this new deal will ''steer the Body Shop's revival and reclaim its global leadership in the ethical beauty sector it pioneered''.Sky News report more.End of February 2024According to reports the Body Shop may be using a CVA to exit from administration in order to continue trading. The administrators have drawn up plans to discuss rent cuts with landlords. Read our page on administration followed by CVA 20th February 2024The Body Shop has announced that it will close approximately half of its stores, starting with 7 that will close immediately today; Surrey Quays (London), Oxford Street (London), Canary Wharf (London), Cheapside (London), Nuneaton (Warwickshire), Ashford Town Centre (Kent), Bristol Queens Road (Bristol).Along with the store closures, is the cutting of 40% of roles at its London headquarters - leaving around 400 full-time employees.The Body Shop ambassador programme is also going to close. This is the scheme were individuals sell products for a commission.Administrators say the brand's current portfolio is ''no longer viable'' after ''years of unprofitability''. The restructuring will include a renewed focus on the companies' products, online sales channels and wholesale. 13 February 2024Following the reports this weekend, administrators from FRP Advisory have officially been appointed to ''accelerate the restructuring'' of the UK arm of The Body Shop.Administrators will explore all options going forward for the business.Joint administrators, Tony Wright, Geoff Rowley, and Alastair Massey, will continue to trade the business in administration. 12 February 2024It has been reported this weekend that cosmetics retail chain, The Body Shop, is preparing to appoint administrators from FRP Advisory to its UK arm. This comes just six weeks after the chains new owner, Aurelius, took control.It is understood that the retailer experienced weak trading over the festive period and early January, coupled with having insufficient working capital.In the UK, Body Shop has 200 stores to the along with its headquarters in London -It seems unlikely that the British cosmetics, skin-care and perfume company, set up by the late Anita Roddick, will disappear from our high streets completely. What is likely, is that there will be a focus on reducing its costs and building up a stronger online presence. The brand still has appeal for its ethical stance and is popular with younger shoppers. Though the process of administration is being explored for the UK operations, the brands global franchise partners are not affected.In fact, very recently, parts of The Body Shop's businesses across Europe and Asia have been sold to an unnamed family office - according to Retail Week.Will we see The Body Shop appoint administrators? Will there be a change in owners for the fourth time?It is interesting to see that the company has not opted for a Company Voluntary Arrangement. This may be due to the fact that its problems do not stem from a number of poorly performing stores (which can be exited in a CVA) but to more widespread difficulties. It is also likely that the owners have security over the assets of the brand. If they have security then they can appoint administrators and are first in line for any payouts.This news piece will be kept up to date in accordance to current events. You can find out more on this story from BBC News.
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What Is A Winding Up Petition By HMRC or Other Creditor
A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.
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Who Are Knowsley Recovery? – Is It Legitimate?
Knowsley Recovery are offering a solution to your issues by offering to buy your insolvent companyDoes this sound too good to be true?The actual process is legal as there is nothing stopping anyone from buying an insolvent company in the hopes of turning it around. However, if the correct course of action is that it should be liquidated, as the debts could never be paid back from current trading, then you have to think why would they do it?!Why take on the debt and the hassle? They will of course most likely allow the company to be wound up eventually by a creditor. Check whether you will be charged for this somehow. Bear in mind that just resigning as a director of a company does not mean that any resposibility for what happened in the past is just wiped away. You could still be disqualified or made personally liable for any of the debts if you have not acted properly. In addition, under the Insolvency Act 1986, when a company is insolvent the directors have a duty to act in the best interest of the creditors. If you pay someone to take it off your hands are you actually acting in the best interest of the creditors or yourself? It is questionable to be sure, and there may be action against you down the road when the company is eventually wound up by the court. Insolvency Practitioners are licensed and under the regulations they have to act in the best interest of creditors.Be very wary if you somehow manage to keep the assets of the company without paying for them. This can be what is deemed as a "transaction at an undervalue" and can be reversed up to 2 years later by a liquidator.Also what about a preference? If you pay back some monies to a family friend instead of HMRC or BBL then again that can be reversed or voided at a later date.It goes without saying that selling the company will not absolve you of any personal guarantees that you gave on behalf ot the company.What if you owe the company money? The new directors will pursue you for the debt. Directors responsibility under law, if the company is insolvent, is to act in the best interest of creditors. So they may pursue you personally for the debt. Many directors are not aware that they owe the company money. If you have paid yourself drawings and not via PAYE and now the company is insolvent it is highly likely that you owe tax that the company has to pay. More on overdrawn directors loan accounts hereUltimately these sort of schemes and legal gymnastics carry risk. Insolvency is highly regulated and there are no shortcuts.Do you want to take the risk and give your money to a firm that is unregulated by any professional body? 2nd September Action by GovernmentCompanies promoting such schemes wound up in the public interesthttps://www.gov.uk/government/news/companies-promoting-corporate-rescue-scheme-shut-down-after-undermining-insolvency-regimeUpdate: 16th July 2024As expected the Insolvency Service has issued a winding up petition, in the public interest, to shut down a similar company Atherton Corporate UK Ltd that operate the website nationalcompanyrescue.co.ukSee below for another company claiming to be able to "buy your insolvent business"https://www.r3.org.uk/technical-library/recovery/recovery-news/more/32146/page/1/insolvency-service-calls-for-help-after-fake-ip-shut-down/
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