London Turkish Radio to continue broadcasting

11 November 2011 | Category: News

London Turkish Radio will continue broadcasting to the Turkish community after the liquidator of Turkish Radio (UK) Ltd, Mr Mehmet Arkin, successfully negotiated the sale of the company's Broadcasting Licence to a third party. Ofcom has consented to the transfer of the Licence, which was in danger of being revoked as a consequence of the insolvency of Turkish Radio (UK) Limited.

Turkish Radio (UK) Limited entered into creditors' voluntary liquidation on 31 October 2011 after succumbing to the effects of the recession with falling advertising revenues and pirate radio stations operating in the company's market place.

The sale of the Broadcasting Licence, for an undisclosed sum, will ensure that London Turkish Radio continues broadcasting to the Turkish community in London and will result in a generous dividend to the creditors of Turkish Radio (UK) Limited.

Companies closed for property scams

8 November 2011 | Category: News

A further two companies have been closed down for landbanking “confidence trick” scams following a probe by the Insolvency Service (IS).

Regency Land Sales and Regency Land Group – based in London, Spain and Belize – were found to have sold worthless land.

The companies – which have been wound up the High Court - attempted to sell land they did not own.

Double trouble

It comes after the IS warned last month that landbanking cons had doubled over the past two years.

The investigation found Regency Land Group used telesales methods to sell small plots of agricultural land in Grantham while Regency Land Sales acted as the UK sales agent for its offshore links.

The company insisted the land would increase in value when it was rezoned for planning purposes.

However, enquiries by The Government’s Companies Investigations, part of the IS, found there was no prospect of rezoning taking place.

And the IS complained Regency companies boss Llewellyn Adam Hannah-Smith and his colleagues failed to cooperate and provide full information during the investigation.

Investigators established the land sold was never legally transferred and purchasers were given a false guarantee of eight per cent growth on their investment in the first 12 months.

The probe found there was a lack of transparency about the management and status of Regency Land Group as a Belize-registered company.

Virtual reality

Company bosses also admitted using aliases when talking to clients, as well as virtual offices and internet-based mail scanning services.

An IS spokesman said: "It was clear these companies were set up as an enormous confidence trick and members of the public were invited to invest on the basis of promised returns that were, at best, improbable.

"The IS will always take action to stamp out such practices in order to protect the general public."

Hannah-Shelton, who lives in Spain, also managed Britannia Land Management which was closed last month in the public interest, following similar concerns over its landbanking activities.

Increasing numbers

Last month, statistics released by the IS revealed that landbanking scams had gone up from 15 in 2009 to 30 this year.

Company investigations, which is the part of the IS tasked with tackling poor company practice, said that, since March 2007, it had wound up 50 landbanking companies.

It is estimated that losses from all landbanking scams now exceed £200 million.

Source: www.insolvencynews.com

Consultion to remove courts from liquidation process

8 November 2011 | Category: News

Courts could be removed from the administration process in a bid to create a more "streamlined" and "efficient" process.

Business minister Edward Davey MP today announced the proposals – called Reform of the Process to Apply for Bankruptcy and Compulsory Winding Up Petition Reform - which aim to save time and money when it comes to “simpler” cases.

Davey believes the plans could save taxpayers millions of pounds if the move away from an entirely court-based process is agreed.

The minister – who urged interested parties to respond to the consultation - said: "Courts have an important role to play in bankruptcy and winding up applications where there is a real dispute between parties.

"But in simpler cases where there is no real disagreement, a more streamlined route into bankruptcy is needed.

"These reforms should help to deliver better outcomes, reduce unnecessary burdens on creditors and debtors, and bring substantial savings for the taxpayer.

"It is essential that we get the detail right, particularly in relation to the level of safeguards required to ensure better results for debtors, while respecting creditors’ rights."

Overall, the consultation proposes electronic applications would be made to a specially-appointed Adjudicator, based at the Insolvency Service.

The Adjudicator would then decide the outcome of each application where there is no disagreement between the parties, allowing courts to focus on dealing with disputes requiring a judicial settlement.

Debtors who want to apply for bankruptcy would have the choice of submitted electronic or paper applications, and the option of making the required payment to enter the process by installments.

Meanwhile, creditors looking to begin proceedings would need to take ‘all reasonable steps’ towards reaching a mutually-satisfactory solution to the debt problem. And debtors will also be encouraged to seek early, free, independent debt advice.

Proposal safeguards include the right to respond to a creditor’s application, the ability to refer a dispute to the court, the right to request a review of the Adjudicator’s decision and to appeal to the court, as well as the introduction of a new criminal offence for submitting false information.

Justice minister Jonathan Djanogly said: "The Government is committed to delivering a modern, efficient justice system.

"We want to make sure the right cases are dealt with in the right ways and this means in some situations, like some debt cases, they should not need to go before the courts at all.

"These proposals form part of our wider work to use courts as a last rather than first resort. The outcomes of this consultation will help us consider our next steps."

A spokesperson for R3 said: "We are not in a position to comment about the latest proposal today but we will do so in the coming days."

The consultation – spearheaded by the Insolvency Service – will last 12 weeks, closing on January 31 2012.

OFT warning to debt management firms

7 June 2011 | Category: News

The Office of Fair Trading (OFT) has warned debt management firms that their licenses will be revoked if they do not operate within guidelines and withhold cash from creditors.

The comments come following a BBC investigation that alleged some firms held on to clients' cash rather than paying it to creditors in a bid to secure lower settlements.

David Fisher, OFT director of consumer credit, said businesses that operated a full final settlement model had a responsibility to tell consumers what they were doing with their money.

"We would be very concerned should a business mislead consumers," he said. "This would call into question its fitness to operate.

"We have warned the industry that it needs to improve its business practices and in June 2011 we will publish further guidance setting out the standards we expect of businesses that we license."

The BBC alleges that in one case Bolton-based Global Debt Solutions offered to arrange a repayment plan for £40,000 of credit card debt and loans but did not pass the money paid over to creditors.

As a result the creditors took the couple who had used the firm’s services to court, resulting in county court judgements against them.

Global Debt Solutions, which became 3 Step Finance, has since been shut down by the Insolvency Service.

Another company, Apex Debt Counselling & Management, is also named in the investigation as having withheld money from creditors.

Industry guidelines state that any money taken from debtors should be passed on to creditors within five working days.

Lisa Colclough, national money advice policy and development manager at Citizens Advice (CA) that offers free debt advice to consumers, said that some firms offered a useful service that people were prepared to pay for but a lack of regulation provided a fertile breeding ground for rogue operators.

"We continue to see far too many people whose debt problems have been made much worse by the high fees and poor service of some debt management companies - including cases where money is not passed on to creditors," she said.

The CA is calling for the Consumer Credit Act and data protection legislation to be updated to tackle these problems and has made a super complaint to the OFT calling for a ban on cold calls and upfront fees. A response is expected from the OFT next week.



Source: www.insolvencynews.co.uk

HMRC gunning for restaurants

4 June 2011 | Category: News

HM Revenue & Customs (HMRC) is again targeting restaurant owners across the UK, as part of plans for several task forces to target tax evaders.

The specialist teams will tackle high-risk trade sectors across the UK, beginning with the restaurant trade in London, during the next few weeks.

HMRC is promising intensive bursts of action to tackle the perceived problem and having started the exercise in London, will then move on restaurants in Scotland and the north west.

Accountancy firm PKF said it welcomed the move, describing the tactics as a better approach than those previously used by tax officials.

Paul Clarke, tax investigation partner at PKF, said: “In the past, we have seen a local inspector doing the odd bit of investigative work on a restaurant and alleging tax fraud if the profits did not match unrealistic national or local averages.

“There was also the infamous ‘tills project’ in 2006 when HMRC sent in staff unannounced to interrogate and reprogramme restaurants' electronic tills – causing considerable disruption in some cases where they could not be reset.”

He added: “HMRC has long seen the restaurant industry as high risk in terms of tax evasion but has often tackled it in an ad-hoc way. Specialist teams who know a great deal about the industry should make the process of being investigated far less painful.”

He added that, at a time when many have accused HMRC of dumbing down its operations through call centres and the like, this could be “one step in the right direction”.

The taskforces are operating under wider government plans to raise an additional £7bn each year by 2014/2015, primarily through a crackdown on tax evasion and non compliance.

The medical profession and offshore bank accounts have been the focus of previous disclosure campaigns, and more recently the plumbing and heating industry.

Gary Ashford, head of tax investigations at RSM Tenon, said: “We are now starting to see the unveiling of HMRC’s new approach to tackling non compliance.

“Clearly HMRC are seeing the restaurant trade as a high-risk area, hence sending in this new task force instead of offering some sort of voluntary tax disclosure facility as we have seen for offshore bank accounts, medics and plumbers.

This may have come out of the intelligence they will have gleaned from the project they had running a few years ago on the restaurants and celebrity chefs.”


Source: www.insolvencynews.co.uk

CCCS warning over struggling households

24 March 2011 | Category: News

More UK households are set to struggle with repayment of their debts in the coming months due to a combination of job losses, falling incomes and rising costs, a debt charity has warned.

The Consumer Credit Counselling Service (CCCS) said that a substantial portion of its clients were unable to meet the costs of everyday living, with the situation becoming unsustainable as more households tried to service debt against a backdrop of falling incomes and rising costs.

The charity identified families as particularly vulnerable with households with dependent children needing an additional £650 a month, to cover everyday living costs compared to those without.

Homeowners meanwhile were also vulnerable as their debt obligations were higher than renters.

According to analysis conducted by CCCS the average client who owns their own home has over £30,000 in unsecured debts on top of their mortgage. Hence a two percent rise in interest rates would lead to a £307 increase in monthly mortgage payments for the charity’s clients across the country.

Lord Stevenson, chairman of CCCS, said: "The picture is undoubtedly bleak and it seems likely that many more families, including better-off ones, will be increasingly prone to over-indebtedness in the months ahead."

Despite the bleak outlook, research by CCCS concluded that average debt levels fell by seven percent in 2010 to an average of £22,476.

Demand for debt advice also fell with almost 418,000 people contacting the charity for help compared with half a million in 2009.

Source: www.insolvencynews.com

Company failure rates slowing down

23 March 2011 | Category: News

The rate of company failures has continued to slow during the first quarter of 2011, falling 1.4 per cent on the last quarter of 2010, according to a commercial credit reference agency.

A report from Graydon UK claims the number of corporate insolvencies is expected to fall by 12.7 per cent compared to the first quarter of 2010, but will be up 8.2 per cent on the number of company failures recorded in the first quarter of 2008, when the effects of the economic downturn had not yet been realized.

The Graydon Insolvency Predictor also states that the impact of January’s VAT increase and speculation about the Bank of England raising interest rates will mean that non-essential retailers are likely to be most at risk, as consumer confidence and spending power both decline.

Martin Williams, head of external communications at Graydon UK, said: “The residual impact of the financial crisis is still being felt keenly, with the number of company failures still considerably higher than they were in 2008, prior to the onset of the downturn.

“We are now beginning to see green shoots, with both Bovis Homes and Persimmon reporting an increase in profits and sales activity in recent weeks to indicate a recovery in the construction sector, a traditional pointer of better prospects for the economy at large.

“The government spending cuts have not yet begun to bite however.”

According to the index, compulsory liquidations in the first quarter of 2011 will continue the downward trend seen in 2010, indicating that creditors are looking for alternative ways to recover their debts, through creditor voluntary arrangements (CVAs) or rescheduling repayments.

Williams added: “When it comes to the threat of insolvency action, struggling businesses appear to be benefitting in two distinctly different ways.

“On the one hand, they are being offered some respite from the threat of compulsory liquidation as creditors consider other options for recouping money owed to them, while HMRC’s Time to Pay scheme continues to provide breathing space to company directors hoping to avoid entering into creditors voluntary liquidation."

He added: "The combination of these two factors is continuing to drive insolvency numbers down.”

Source: www.insolvencynews.com

HMRC rejecting more CVAs, K2 specialist claims

7 February 2011 | Category: News

HM Revenue and Customs is increasingly rejecting company voluntary arrangements (CVAs), according to a turnaround specialist from K2 Business Rescue.

Tony Groom said that in the past HMRC has appeared to be a supporter of CVAs, but he believes they have recently been rejecting a number of CVA proposals that they would have approved in the past.

In his regular industry article Groom said that while there are no published statistics on the numbers of liquidations resulting from failed CVAs, historically a large percentage have failed.

His article added: “Statistics only measure the number of formal procedures including CVAs and liquidations, but they do not identify the numbers of liquidations that have resulted from either rejected CVA proposals or failed CVAs post approval.

“However, among business rescue advisers and insolvency practitioners it is believed that the failure rate of CVAs post approval is somewhere between 60 per cent and 70 per cent.”

Groom points out that HMRC website guidelines to case officers indicate that they should attempt to get arrears repaid within 12 months with longer periods being the exception.

“This may explain why HMRC is now rejecting more proposals because its objective is to maximise early repayment contributions for clearing VAT and PAYE arrears rather than accepting those that propose a realistic repayment schedule with lower early repayments.

”From the viewpoint of the business in difficulty a low level of contributions in the early period of a CVA allows it to get back on its feet in the short term while refocusing the business on survival and increasing profits, thus enabling it to pay higher contributions later in the CVA.”

Groom said this increases the chances of the business being able to maintain its payments throughout the CVA period and reducing the risk of failure.

“High repayments required in the early stages will mean it cannot do this.

”The emphasis for anyone drafting a CVA proposal must be focused on realism, on it being achievable, with supporting evidence of how this will be done, and not on getting it approved regardless of whether the business is going to be able to stick to it.”

Groom added that the balancing act between maximising contributions for the benefit of creditors while at the same time being realistic, so that it survives and pays the contributions, is key to persuading HMRC to support a CVA proposal.



Source: www.insolvencynews.com

Game’s up for tax cheats

7 February 2011 | Category: News

Any individual caught hiding cash offshore could face new penalties of up to 200 per cent, HM Revenue & Customs (HMRC) has warned.

From April 6, offshore non-compliance penalties for income tax and capital gains tax will be linked to the tax transparency of the country involved.

There will be increased penalties in place for under-declared income and gains from territories which do not automatically share tax information with the UK.

David Gauke, financial secretary to the Treasury, said: “The game is up for those going offshore to evade tax. With the risk of a penalty worth up to 200 per cent of the tax evaded, they have a great incentive to get their tax affairs in order.”

Anyone caught hiding money in territories which don’t exchange information with the UK could face a penalty which is double the amount under the existing rules.

Gauke added: “We have given HMRC an extra £900m to tackle tax cheats because we are prepared to act against the minority who refuse to pay what they owe.”

Dave Hartnett, permanent Secretary for tax at HMRC, said: “We are serious about tackling offshore evasion. Hiding tax liabilities offshore believing that you will never be discovered is no longer a realistic hope.

“These new penalties will increase the deterrent against offshore non-compliance. They build on other activity, including signing tax information exchange agreements, requiring information about offshore bank accounts and disclosure opportunities, including the Liechtenstein Disclosure Facility (LDF).”

The new penalties for income tax and capital gains tax non-compliance classify territories into three groups, which determine what level of penalty will apply for non-compliance.



Source: www.insolvencynews.com

Howes Percival to assist Asil Nadir probe

14 December 2010 | Category: News

Howes Percival has been appointed by the trustee in bankruptcy of the estate of fugitive and former tycoon Asil Nadir, to help investigations into his finances. Nadir, the former head of Polly Peck, the fruit-to-electronics conglomerate, remains an undischarged bankrupt whose estate is subject to claims from creditors exceeding £375m.

Kevin Hellard, head of the fraud insolvency division at Grant Thornton and Nadir’s trustee in bankruptcy, has instructed Nick Oliver, partner and head of insolvency and corporate recovery at Howes Percival, and a team of solicitors from Howes Percival, to assist his investigations. Oliver is a specialist in forensic insolvency investigations and fraud-related insolvency issues.

Nadir, the former head of Polly Peck which collapsed in 1990 amid allegations of false accounting and theft, returned to the UK earlier this year having spent the last 17 years in northern Cyprus to where he fled before criminal charges against him could come to trial. Nadir remains bankrupt, his discharge from bankruptcy having been suspended by the high court in London.

Source: www.insolvencynews.com

Company director jailed for 18 months

14 December 2010 | Category: News

A company director from County Durham has been jailed for 18 months after pleading guilty to two charges of fraudulent trading and stealing £170,000 of European Commission funds.

After a successful prosecution by the Department for Business, Innovation and Skills (BIS), Mr Elmo Mohan Emmanuel, director of Implants International, was disqualified from acting as a director of a limited company for 15 years.

In May 2001 the European Commission made the advance payment of £170,000 to Implants International, which was involved in an EU research project aimed at improving the lifespan of orthopaedic devices for disabled people.

Implants International was supposed to distribute this funding to research institutions, but Emmanuel retained the money and used it for his own purposes before pulling out of the project in March 2002.
The European Commission began legal proceedings against him for the recovery of the £170,000 and a default judgement was obtained before the European Court of Justice in February 2005.

Implant International applied to set aside the judgement but this was dismissed by the court in January 2006, with the company ordered to pay back the payment plus interest and costs.

Emmanuel put Implants International into administration in July 2006, later forming a company in the same name and purchasing the assets from the original company.

BIS opened a criminal investigation against Emmanuel after being notified by the European Anti-Fraud Office (OLAF). Both OLAF and the commission provided evidence to BIS which was used during the trial.

Following an initial plea of not guilty, on day six of the trial, Emmanuel changed his plea to guilty on 25 October 2010.

Edward Davey, minister for employment relations and the Insolvency Service, said: “ The judgement is an excellent outcome and shows the benefits of the successful collaboration with our colleagues in Europe. It sends a warning that the government will crack down on businesses that operate on the wrong side of the law.”

Source: www.insolvencynews.com

Mid-sized firms still in trouble

22 November 2010 | Category: News

Mid-sized companies suffered a year-on-year increase in the number of corporate insolvencies in October, despite a decrease in failure rates across all UK regions, according to new figures.

The latest Insolvency Index from Experian revealed that 1,635 UK businesses failed last month, which was 17 per cent fewer than in October 2009, when 1,976 businesses became insolvent.

Of that total, mid-sized companies with 51 to 100 or more employees were the only businesses to see an annual increase, with the insolvency rate leaping to 0.24 per cent from 0.19 per cent in 2009.

Elsewhere all UK regions saw year-on-year falls in corporate insolvency rates, but despite the relative recovery only 10 out of the 35 industries saw an improvement in their financial strength, with the leisure and hotel industry demonstrating the biggest improvement of any sector.

Max Firth, managing principal of pH, an Experian company, said: “It is encouraging that the business population in general is faring better in terms of insolvencies than this time last year, despite mid-market failures increasing in October.”

Despite the improvement, the business services industry remained the worst affected, with 374 businesses becoming insolvent in October this year compared to 413 a year ago.

This was followed by the construction industry where 235 insolvencies occurred in the last month compared with 290 in October last year.

Yorkshire and the north east (the regions with the highest insolvency rate in October 2009) saw the biggest improvements in insolvency rates over the last year, with 0.11 per cent of businesses in the north east failing in October 2010, compared to 0.14 per cent in October 2009, while Yorkshire saw rates decline from 0.15 per cent to 0.07 per cent.



Source: www.insolvencynews.com

Debt charity warns of calm before the storm

22 November 2010 | Category: News

A UK debt charity has warned that the debt crisis looks set to escalate again, despite the latest figures indicating a drop in personal insolvencies.

The Debt Advice Foundation warns that the country is currently experiencing the ‘calm before the storm’ and predicts that the number of people facing insolvency could rocket by 20 per cent following the outcome of the government’s spending review.

With speculation that 500,000 public sector jobs could be lost by 2014, the charity said that although personal insolvency figures have now fallen for the second consecutive quarter, the country is still sitting on a financial time bomb.

Recent insolvency statistics from the Insolvency Service show that there were 33,935 individual insolvencies in England and Wales in the third quarter of 2010. This was a decrease of 3.7 per cent on the same period a year ago.

David Rodger, managing director of Debt Advice Foundation, said: “Although 2010 has seen a reduction in the number of people becoming insolvent, the prospect of half a million public sector jobs being cut with little hope of the private sector picking up the slack, unfortunately means that the worst could be yet to come.”

Last year saw the highest number of personal insolvencies on record and despite the current reprieve; the potential job losses could push insolvency to an all-time high.

Rodger added: “Although insolvency volumes are the product of a number of contributory factors, unemployment, particularly new unemployment, is a key determinant.

If the predicted spending cuts go ahead we could see insolvencies rise to in excess of 40,000 per quarter, which is 20 per cent higher than present levels.”


Source: www.insolvencynews.com

Female bankruptcies hit record highs

19 October 2010 | Category: News

The number of women becoming bankrupt has hit a record high after it has been revealed the recession has hit the female population three times harder than men. According to figures released by the Insolvency Service the number of women falling into insolvency in just one year has soared to an all-time record of nearly 65,000, a staggering 175 a day. By comparison the number of insolvent men rose by eight per cent, to 75,111. Of 64,035 insolvent women, just over 45,000 are aged between 25 and 49. Insolvency experts have blamed a “Madame Bovary” lifestyle for the sudden rise in female insolvencies, where women have spent beyond their means to obtain the lavish trappings associated with celebrities.

Source: www.insolvencynews.com

Economy fears ahead of spending review

19 October 2010 | Category: Articles

Former Bank of England policymaker David Blanchflower today warned that the UK economy is in "desperate danger" of slipping back into recession and the government’s planned spending cuts will make matters worse. Blanchflower said: “The BoE unfortunately looks like the only ‘plan B’ the government has, but quantitative easing just doesn’t act fast enough.” The comments which come just two days before the government sets out £80bn of spending cuts in its Spending Review, is at odds with the views of 35 business leaders, including Marks & Spencer chairman Sir Stuart Rose, who have written an open letter in the national media saying there is “no reason to believe” the chancellor’s plan to eliminate the structural deficit will undermine the economic recovery.

source: www.insolvencynews.com

Northern firms are "failing"

1 September 2010 | Category: News

Businesses in cities in the north of England are struggling, new figures released by the Insolvency Service reveal.

The city with the highest business insolvency rate in the country is Bradford, the figures show, with 0.6 per cent of business in the city failing.

Manchester is following close behind, with business insolvency rates of 0.57 per cent – a rise of 17 per cent for the first three months of the year, according to the new figures.

There’s better news for the construction industry across the UK, with a small drop in the total number of administrations in the second quarter, down from 87 to 86, compared with the first quarter. Construction companies are particularly vulnerable as problems with a project can lead to cost overruns.

KSA Group is helping a number of SME construction companies with sales ranging from £800k to £20m. These companies are all viable, but cost overruns or bad debts have pushed them towards insolvency.

However, struggling businesses that continue to trade are not included in the statistics, so the figures may not represent a true figure of the current situation, KSA Group marketing manager Robert Moore warned. “The actual statistics hide the true picture, as they don’t show how many companies are trading on a ‘stay of execution’ before the HMRC decides to call in their debts,” he said.

Source: www.insolvencynews.com

Nadir to face fresh creditor claims

1 September 2010 | Category: News

Asil Nadir faces the prospect of fresh legal action to recoup up to £375m claimed by his personal creditors following his return from northern Cyprus to the UK.

Nadir remains an undischarged bankrupt, and those working on behalf of creditors say they can seek to seize even those assets acquired or generated since his bankruptcy in 1991 and his unauthorised departure from the UK 17 years ago.

It has emerged that creditors have received little more than £70m. Out of the £2bn debts Nadir left behind, partners at PricewaterhouseCoopers and Deloitte have estimated that £500m went from Polly Peck to companies or bank accounts in Northern Cyprus and Turkey where creditors have failed to claim money.

They have recovered about £210m across the group, most from the sale of foreign businesses in the Polly Peck group including Del Monte, Russell Hobbs and several hotels.

Much of the rest of the outstanding debts went to support lossmaking operations, and reflected acquisitions that could only be sold at a loss.

Kevin Hellard, partner at Grant Thornton who is running Nadir’s personal bankruptcy, is studying reports Nadir had business interests and led an opulent lifestyle in northern Cyprus.

Nadir returned to the UK on a private jet last Thursday and is currently staying in rented accommodation in Mayfair at £20,000 a month and had to fork out bail money of £250,000.

Hellard told the Financial Times that since 1991 he has been able to secure and liquidate less than £1m in assets to pay off creditors owed £375m by Nadir personally, including the UK tax authorities and a range of banks.

The largest claim is from a group of creditors of Polly Peck, the holding company, which went into administration in 1990. Partners at PricewaterhouseCoopers and Deloitte handling the case estimate that £263m went to Mr Nadir or companies he controlled.

Sources: People and www.insolvencynews.co.uk

Fewer corporate insolvencies in June

20 July 2010 | Category: News

Fewer UK businesses went bust in June but the north-south divide in relation to insolvencies is growing, according to new figures.

The latest Insolvency Index from Experian shows that 1,771 UK businesses failed during June 2010, 13.4 per cent fewer than in June 2009 when 2,044 firms became insolvent. As a result, the year-on-year insolvency rate fell from 0.10 per cent to 0.09 per cent in June.

The index also shows that the overall financial strength score of UK businesses is improving, from 80.83 in June 2009 to 80.66 in June this year.

Smaller businesses with 11 to 25 employees saw the greatest year-on-year reduction in the insolvency rate, falling from 0.29 per cent in July 2009 to 0.20 per cent.

But figures for the north of England showed a growing divide with the south. At 0.14 per cent, the north east had the highest insolvency rate of the regions in June, with Yorkshire close behind at 0.12 per cent.

At the opposite end of the country, businesses in the south west saw a UK low of 0.07 per cent, while Greater London had an insolvency rate of 0.08 per cent.

Rolf Hickman, managing director of Experian company pH Group, said: “June’s data indicates that the UK’s business community as a whole is stabilising. Businesses in the north of England seem to be faring slightly worse than their southern counterparts across all industry sectors.”

Scotland was the only region in the UK to see an increase in the insolvency rate – up to 0.08 per cent from 0.06 per cent in June 2009.

Hickman added: “Although the data hints at some improvements, individual organisations are impacted in different ways. It is vital for businesses to understand the circumstances of those they are doing business with and the risks they could expose them to."

Insolvency Service axes 50 investigators

15 July 2010 | Category: News

The Insolvency Service has swung the axe on 50 front line official receiver investigators in a move which is “tantamount to legalising corporate theft”, according to sources.

The mass job cut will mean that every regional office across the country will feel the loss of around three insolvency investigators.

It is believed the majority of investigators who have been made redundant were working within the corporate division.

Official Receivers typically investigate an average of 30-40 cases at any one time, and at the time of going to press no contingency plans had been drawn up by the Insolvency Service regarding the work load and cases under investigation by former staff.

One source familiar with the developments said: “Insolvency practitioners have complained before that the Insolvency Service wasn’t doing enough director disqualifications – and these actions will worsen the situation.

“Making these front-line cuts is tantamount to legalising corporate theft.”

Recent investigations by the Insolvency Service have led to a director of a failed solar company being disqualified for nine years after it was found he had run the business in a way that was detrimental to creditors and consumers.

Richard Curtin, partner at law firm Faegre & Benson, said: "These cuts are being made at a time which is going to be so busy for insolvency investigators and will mean delinquent directors will get away with it. In these austere times, insolvency isn't a sexy division for the government to pump money into."

The Department of Business (BIS) was the hardest hit by chancellor George Osborne’s “unavoidable” budget in May. Vince Cable’s department has been told it must make £636m of efficiency savings to tackle Britain’s ballooning deficit as the country enters an age of austerity. The 3,000 staff at BIS have already been informed of a voluntary redundancy programme to cut part of the £38m of administrative costs as ordered by Osborne. According to reports, up to one in four staff in some BIS operations are at risk.

The Insolvency Service is charged with the role to administer the current insolvency regime and investigate all compulsory liquidations and bankruptcies through the Official Receiver to establish why they became insolvent.

The Insolvency Service declined to comment on the redundancies and said it “was too early to talk specifics.”




Source: www.insolvencynews.com

HMRC gets tough on dodgy directors

15 June 2010 | Category: News

The number of directors of insolvent firms facing disqualification proceedings for not paying business tax has jumped 24 per cent in the year to March 2010.

A total of 813 directors had proceedings brought against them in court for non-payment of company tax in the year ending 31 March 2010, compared to 654 in the previous year, according to figures obtained by independent finance provider Syscap.

Separate figures from the Insolvency Service show that the number of company insolvencies declined by 17.8 per cent over the same period.

Disqualification orders ban individuals from being directors of a limited company or from being involved in the promotion, formation or management of a company for up to 15 years. Directors who have been disqualified have unlimited liability for the losses of any company that they have been involved with in contravention of the disqualification order and may also be criminally liable.

Syscap claimed the figures show that despite HM Revenue & Customs (HMRC) taking a less aggressive approach to collecting tax from distressed businesses, HMRC is increasingly prepared to instruct the Insolvency Service to take individual directors to court.

Philip White, chief executive of Syscap, said: “This is a huge increase in court proceedings against directors. It’s all the more shocking because the number of company insolvencies has declined sharply over the last year.

“These figures are a wake up call for directors of companies encountering cashflow difficulties. On the one hand HMRC is allowing companies to defer tax, but with the other it is taking an increasingly aggressive stance towards individual Directors who fail to meet their obligations to the taxman.”

He adds: “Directors often choose to pay suppliers over HMRC in the belief that this will ensure the immediate survival of their businesses. Continuing to trade while neglecting to pay HMRC is a risky strategy that could backfire if the company subsequently becomes insolvent.”

Syscap points out that HMRC is rejecting a higher proportion of applications for its Time to Pay scheme and is scaling back the amount of tax it is prepared to allow businesses to defer.

The firm claims that businesses unable to meet their tax obligations and who are not eligible for Time to Pay can still obtain credit to pay their tax from funders.

White says: “With HMRC making it harder for businesses to defer tax under Time to Pay and the government under intense pressure to maximise tax receipts, we may well see even more prosecutions of directors for failing to meet company tax obligations in the coming year.”


Source: www.insolvencynews.com

HMRC rejects £42m of 'Time to Pay' requests

18 May 2010 | Category: News

HM Revenues and Customs is toughening up its approach to companies requesting the chance to defer their VAT payments under the Time to Pay scheme.

HM Revenues and Customs is toughening up its approach to companies requesting the chance to defer their VAT payments under the Time to Pay scheme.

Figures reveal that HMRC refused £42m worth of requests to defer VAT payments in the first quarter of this year, according to information obtained by a Freedom of Information (FOI) request by IT finance provider Syscap.

HMRC rejected more than 11 per cent of applications during the first quarter of this year, more than double during the same period a year ago, according to the information obtained under the FOI. In 2009 HMRC declined just 5.3 per cent of company requests.

The previous Government's support in giving businesses time to pay their their debts to HMRC via the Business Payment Support Service (BPSS) has been widely acknowledged as having provided a lifeline to many businesses. However, as this scheme is squeezed, the level of corporate failures are set to rise.

Philip White chief executive of Syscap said: "SMEs are still finding it incredibly hard to borrow money from their bank to pay HMRC VAT so news that the HMRC refusal rate has shot up is worrying.”

White added: “GDP growth of 0.2 per cent [in the first quarter of the year] shows the economy is weak, not strong, and that more needs to be done to help SMEs, not less.”

HMRC recently introduced a rule on 6 April which means that firms seeking to defer more than £1m in tax payment must first provide an independent business review.


Steven Law, president of trade association R3, said: "Time To Pay has been a vital factor in preventing an expected spike in corporate insolvency numbers and no-one would argue that it should be removed suddenly."

However we supported HMRC’s decision to enforce an Independent Business Review on requests worth more than £1 million. At some point there will have to be a tightening in the system at requests for lower amounts as the scheme was always meant as a temporary breathing space rather than a long-term supply of credit.”


HMRC has insisted that the process for approving or turning down requests has not been made more rigorous and that each application is judged according to the circumstances of the firm making it. HMRC has disclosed it believes an IBR will cost as much as £75,000 with the average cost estimated at £42,500. The cost must be borne in its entirety by the business applying under “time to pay”.



Source: www.insolvencynews.com

Personal bankruptcies on the rise

17 May 2010 | Category: News

The number of people attempting to make themselves bankrupt jumped by a fifth in the first three months of this year, according to figures released by the Ministry of Justice (MOJ).

The figures show the number of bankruptcy petitions lodged in the courts by debtors rose 20 per cent from the previous three months to 16,348.

Bankruptcy proceedings started by creditors also rebounded, up by four per cent to 4,329 during the first quarter.
The MoJ said individuals and companies may have rushed through bankruptcy filings to escape the fee hike by the Official Receiver. Fees relating to The Official Receiver’s Deposit towards the costs of administering insolvency cases increased this year on 6 April for debtors’ bankruptcy petitions from £360 to £450, creditors’ bankruptcy petitions from £430 to £600, and company winding up petitions from £715 to £1,000.
An MoJ spokesperson said: “This created an incentive for companies and individuals to present petitions to the courts before 6 April and may therefore have resulted in the increase number of petitions being made in the first quarter of 2010 compared to recent quarters.”
However Mark Sands, head of bankruptcy at RSM Tenon, dismissed the notion that fees had an impact on the figures. He said: “I would be very surprised if it was the fees that affected the results – few people are even aware of the fees and I don’t believe the increase was well known by debtors.”
Sands pointed to the three per cent year-on-year drop in individual bankruptcy petitions and said this was likely to be a result of the introduction of Debt Relief Orders (DROs), which did not exist during the same period a year ago.
Debt Relief Orders (DROs), which were introduced in April 2009, allow consumers with debts of less than £15,000, and minimal assets or surplus income, to write off their debts without entering into a full blown bankruptcy.
Sands said: “Once the 5,644 DROs are taken into account we can see that 33,209 people chose to enter into a form of personal insolvency in this three month period, as opposed to being made bankrupt by a creditor. That means that a record proportion of 93 per cent of personal insolvencies were driven by people deciding that they cannot wait any longer."
He added: "Although the glass has started to look half full for the economy, it’s very much been drained of every drop when it comes to individuals’ personal finances. Months of job losses and decreased earnings has taken its toll on the public’s purse strings. We are likely to continue to see record numbers of people look to insolvency into 2011."


Source: www.insolvencynews.com

Insolvencies reach record levels

5 May 2010 | Category: News

Over 388 people entered insolvency every day during the first three months of this year, according to the latest figures from RSM Tenon Tracker.

In a bleak start to the year, the number of insolvencies also reached record levels in March, dashing hopes of an early recovery. There were 14,000 insolvencies in March, 16 per cent higher than the previous monthly record in November 2009. The number of personal insolvencies spiked during the first three months of the year, increasing by 15 per cent to 35,000 compared to the same period a year ago.

Mark Sands, head of bankruptcy at RSM Tenon, said: “The ‘debt-lag’, where monies owed have piled up over a series of months before insolvency hits, can last from anything between 9-24 months. The record insolvencies for March will partly be a hangover from Christmas, but it is more likely to be due to the ongoing effects of the financial crisis.”

Individual voluntary arrangements (IVAs) however fell by 16 per cent compared to the previous quarter. However, Sands said the fall is not indicative of an overall drop in insolvencies, but that the difficult economic climate has made it harder for people to make regular monthly repayments.

Bankruptcies and Debt Relief Orders (DROs) rose by 8 per cent and 6 per cent respectively “Around half of all personal insolvencies are bankruptcies so this apparently modest 8 per cent increase actually translates to more than 1,300 extra people going bankrupt in the last quarter.”

Source: www.insolvencynews.com

160,000 companies in financial distress

5 May 2010 | Category: News

Over 160,000 companies are experiencing significant or critical financial distress, according to figures out today from Begbies Traynor.


In its latest Red Flag update, which highlights troubled companies, the business recovery specialist reported the number of firms experiencing significant financial problems has jumped by 20,074, or 14 per cent, to 161,601 in the first three months of this year.

Begbies Traynor estimates that seven per cent of the increase is the result of a trade creditors becoming more aggressive, with an increase in court actions evidence of their growing willingness to take action against their debtors. The remainder of the increase could be attributed to normal seasonal uplift.

The survey shows that distressed UK businesses owe over £55bn to creditors, suppliers and service providers putting them at a severe risk of defaulting.

Ric Traynor, executive chairman of Begbies Traynor Group, said: "While the economy appears to be showing positive signs of recovery, the magnitude of the liabilities still at risk of default represents a serious risk to creditors, indicating the potential far-reaching impact of these levels of distress. It is this ripple effect which represents a real threat to a sustained economic recovery."

The sectors worst affected in the first quarter of 2010 include construction, in which companies experiencing significant or critical financial problems were up 30 per cent, professional services up 19 per cent, property services up 42 per cent , recruitment up 18 per cent and retail up 19 per cent on the previous quarter.

Traynor added that companies will be put at an even greater risk should interest rates rise during the economy’s recovery. He said: "Low interest rates have been one of the principal reasons why business failures have not yet reached the peak levels many feared this savage recession would cause."

Experience of previous recessions shows that the recovery phase of the economic cycle has represented the greatest challenge to vulnerable small and medium sized businesses (SMEs), meaning that the inevitable withdrawal of the government's Time to Pay scheme could topple more firms.

www.insolvencynews.com

Rent deadline threatens retailers

24 March 2010 | Category: Articles

INDUSTRY WARNS MORE BUSINESSES COULD COLLAPSE

The high street is bracing itself for a wave of retail collapses this week as a huge rent deadline looms.

Wednesday will be one of four so-called “quarter days” where rents have to be paid three months in advance, a system seen by many retailers as archaic.

Richard Fleming UK head of restructuring at the KPMG, said: “The March rent quarter date may be the nail in the coffin for retailers who have not traded well over the past few months.

“Creditors effectively have to decide now whether to support businesses now through to the end of the year."

High profile retail magnates including Topshop boss Sir Phillip Green have been lobbying the government for a change to the system, but until it is overhauled this rent deadline could spell the end for many business who are already teetering on the brink due to recessionary pressures.

Many retailers are currently in the process of negotiating with landlords a switch to monthly rent payments to bolster cash flow. Other solutions include disposing of empty or underperforming stores, through company voluntary arrangements (CVAs).

Rarely seen until the recession, CVAs have become more common as businesses face the threat of failure. They allow companies under threat of administration to renegotiate debts with unsecured creditors but some landlords regard them as a tool to escape individual lease liabilities.

Bankruptcy Petition Fees to Rise

2 March 2010 | Category: News

Indebted borrowers will find it more difficult to go bankrupt from April as the Government is raising its bankruptcy fees by £90.

The Government-backed Insolvency Service is due to raise its bankruptcy petition fees from £360 to £450 from April 6, even though the cost of administering a bankrupt has not gone up.
There is also an additional court fee of £150, which can be waived if a debtor is on benefits. Otherwise the total cost of going bankrupt is now a substantial £600.

One debt campaigner believes this will make it harder for people who cannot repay their debts from turning their lives around, and also believes this is a cynical ploy by the Government to reduce insolvency figures at a time when they are at historic highs.

Those who cannot repay their debts but can also not afford bankruptcy are often forced into informal debt plans, called Debt Management Plans (DMPs) – figures for which are not recorded or published by the Government – which can take decades to clear or even partially pay off.

Mike Thomas from debt advice website debtwizard.com said: 'These people will have to stay in DMPs for decades or they will duck and dive and hide from their creditors. For their own well-being it would be better to allow them to go bankrupt. I've met some people who are on the verge of suicide over this. For the sake of the economy as well, it is better to allow these people to start living productive lives again.'

The Insolvency Service said it is raising its fees as the economic downturn – and the fall in property prices in particular – has meant it is unable to recover enough money from debtors to cover the £1,715 it costs to allow them to go bankrupt.

A spokeswoman said: 'The economic downturn has reduced asset values, especially property, which means a greater proportion of cases don't generate enough money to cover the fee. This has meant that within the overall fee structure, we have had to ensure that more cash is realised earlier in the process. This has led to increases for some but will ensure that the cost of the regime is paid partly by the debtor and partly by creditors.

'Over the last year, the average unsecured debt in debtor petition bankruptcies has been around £33,000. Even with the new higher petition deposit cost, it is not unreasonable to expect those getting the benefit of writing off this debt to pay a proportion of the cost.'

She points out debtors can also turn to new quickie bankruptcies called Debt Relief Orders (DROs), which only cost £90. Debtors must have assets of less than £300, although the Insolvency Service has recently proposed allowing people with pension pots worth over £300 to apply. They must also have debts of less than £15,000 and, given that the average bankrupt has debts of £33,000, this will prevent many from applying for a DRO.

Source: www.thisismoney.co.uk