National Insolvency figures published (17 September 2021) by the Government’s Insolvency Service have indicated that the number of registered company insolvencies in August 2021 was 1,348:

• 71% higher than the number registered in the same month in the previous year (788 in August 2020), and
• similar to the number registered two years previously (pre-pandemic; 1,366 in August 2019).

(Statistics published in https://www.gov.uk/government/statistics/monthly-insolvency-statistics-august-2021/commentary-monthly-insolvency-statistics-august-2021)

Since the start of the first UK lockdown as a response to the coronavirus pandemic in March 2020, overall numbers of company and individual insolvencies have remained low when compared with pre-pandemic levels. As the Insolvency Service does not record whether an insolvency is directly related to the coronavirus pandemic, it is not possible to state the direct effect of the pandemic on insolvency volumes. Although, it is likely to be attributed to government measures put in place to help protect businesses from insolvency, under the Corporate Insolvency and Governance Act (2020) (Coronavirus) including the restriction of statutory demands and winding-up petitions which have previously been extended on several occasions up until 30^th September 2021. 

On the 9th September 2021 the government announced the Temporary Insolvency Restriction Protections are to be lifted and new targeted measures to support small business and commercial tenants will be introduced.  The current restrictions in place will now be phased out from the 1st October 2021. 

New legislation will come into force until March 2022 and will include:

1. Protect businesses from creditors insisting on repayment of relatively small debts by temporarily raising the current debt threshold for a winding up petition to £10,000 or more.
2. Require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding up action.

“The true picture of the impact of company and individual insolvencies to the construction industry is likely not to be fully understood until the 12 months ending 2021. With the threshold for issuing a petition being increased we advise our members to look at their options for collection and take advice from their collections service provider on the best course of action.”  Emma Miller, Company Director Top Service Ltd

Post Insolvency Debt Collection Service

We provide Insolvency Practitioners with a tailored end to end Post-Insolvency Debt Collection Service. We provide our service in collaboration with Silverback Commercial Law who offer competitive rates if legal action is required to recover monies owed. 

What we offer

• Free of Charge Ledger Consultation
• Collections Process with online access to live information on all cases
• Retention & Contract Collections
• Legal Action to Recover monies owed
• Dispute resolution

What makes us different?

• Our bespoke collection strategies mean that no case is treated the same. Our access to credit information and exclusive trading experiences enables us to change strategy quickly when our incoming intelligence is received, providing excellent results.
• Fast, effective collections. We know that speed is of the essence, so all collections are given top priority.  We don’t just go through the motions, our experienced and highly skilled team members are adept at tricky negotiations, dispute resolution, tracing absconded debtors and thinking outside of the box to achieve tangible results.
• Fully compliant.  We have been trading for 30 years and we have always taken compliance very seriously.  We are authorised by the FCA and Top Service Ltd is a corporate member of the Credit Services Association (CSA).  All senior Top Service staff are members of the Chartered Institute of Credit Management and collections professionals are hand-picked and trained to the highest standards. 
• We have 30 years of experience in collecting commercial and contract debts.

To discuss our Post Insolvency Collections Service with a member of our expert team please email insolvencycollections@top-service.co.uk.

Are you struggling to recover the money you are owed?

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

The Ministry of Justice UK has published its response to the consultation on ‘Increasing selected court fees and help with fees income thresholds by inflation’.

The Government has analysed the responses to the consultation and considered the impact of policy proposals and recurring themes raised by some of the respondents. The consultation invited comments on the proposal to increase some court fees in line with historical inflation dating back to August 2016, or the date the fee was last amended if later, to the start of the 2021/22 financial year. 

The Statutory Instrument to effect these changes will shortly be laid before Parliament and the changes will come into effect on 30 September 2021. The new fee structure is outlined below (provided by trusted partner Silverback Law)

Emma Miller, Top Service Company Director says:

“With court fee’s increasing coupled with the announcement that temporary insolvency restrictions brought in by the Corporate Insolvency and Governance Act (Coronavirus) to protect businesses from creditor action will be phased out from 1^st October 2021 we are seeing more and more customers reviewing their current collection methods and looking for alternatives to court action. We advise members to look at their options for collection and take advice from their collections service provider on the best course of action and consider all options.” 

• The temporary measures were introduced in the Corporate Insolvency and Governance Act 2020
• The full Government response to the consultation can be viewed here

What makes Top Service Ltd different? 

As the only credit reference and debt recovery agency specific to the construction industry, we make it our mission to ensure our members receive the most up to date, credit information and company trading experiences which can make a real difference between company profit and painful write-offs. 

Are you struggling to recover the money you are owed?

Top Service members have access to an exclusive combination of no collection, no fee debt recovery services.

“We welcome the opportunity to talk to you about any bespoke changes you would like to make to our debt recovery procedures to fit the culture you have for maintaining customer relationships, whilst addressing the need to keep cash flow as fluid as possible for your business.Please contact our collections team to talk through any individual cases or to explore how else we can support you,” Emma Miller, Company Director Top service Ltd.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

The government has announced (9 September 2021) that the Temporary Insolvency Restriction Protections are being lifted^[1] and new targeted measures to support small business and commercial tenants will be introduced.  

To help protect businesses from insolvency a number of changes were introduced under the Corporate Insolvency and Governance Act (Coronavirus) to protect business from creditor action since June 2020, these restrictions will now be phased out from the 1^st October 2021. 

New legislation will come into force until March 2022 and will include:

1. Protect businesses from creditors insisting on repayment of relatively small debts by temporarily raising the current debt threshold for a winding up petition to £10,000 or more.
2. Require creditors to seek proposals for payment from a debtor business, giving them 21 days for a response before they can proceed with winding up action.

Emma Miller, Top Service Company Director says:

“With the threshold for issuing a petition being increased, we advise members to look at their options for collection, take advice from their collections service provider on the best course of action and consider all options.” 

The temporary measures were introduced in the Corporate Insolvency and Governance Act 2020

What makes Top Service Ltd different? 

As the only credit reference and debt recovery agency specific to the construction industry, we make it our mission to ensure our members receive the most up to date, credit information and company trading experiences which can make a real difference between company profit and painful write-offs. 

Are you struggling to recover the money you are owed?

Top Service members have access to an exclusive combination of no collection, no fee debt recovery services.

“We welcome the opportunity to talk to you about any bespoke changes you would like to make to our debt recovery procedures to fit the culture you have for maintaining customer relationships, whilst addressing the need to keep cash flow as fluid as possible for your business.Please contact our collections team to talk through any individual cases or to explore how else we can support you,” Emma Miller, Company Director Top service Ltd.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

^[1] https://www.gov.uk/government/news/end-of-temporary-insolvency-measures [gov.uk]

National Insolvency figures published (17 Aug 2021) by the Government’s Insolvency Service have indicated a 13% increase in business insolvencies in England and Wales compared to the number registered in the same month in the previous year (965 in July 2020), but 24% lower than the number registered two years previously (pre-pandemic; 1,442 in July 2019)^[1].

Since the start of the first UK lockdown as a response to the coronavirus pandemic in March 2020, overall numbers of company and individual insolvencies have remained low when compared with pre-pandemic levels. As the Insolvency Service does not record whether an insolvency is directly related to the coronavirus pandemic, it is not possible to state the direct effect of the pandemic on insolvency volumes.^[2] Although, it is likely to be attributed to government measures put in place to help protect businesses from insolvency, under the Corporate Insolvency and Governance Act (2020) (Coronavirus) including the restriction of statutory demands and winding-up petitions which have previously been extended on several occasions up until 30^th September 2021. ^[3]

The Corporate Insolvency and Governance Act 2020 introduced provisions to the Insolvency Act 1986 which came into force on 26 June 2020. A moratorium forms part of a package of significant legislative reforms intended to enhance the UK’s restructuring and rescue culture. The changes allow breathing space for businesses in financial distress giving them an opportunity to explore rescue and restructuring options, free from creditor action. The process was designed to encourage companies to act earlier to restructure debt and improve a company’s chances of success.

The moratorium is focused on the survival of the company rather than the realisation of its assets, with a view to try to save the life of a company as a going concern by effectively allowing a payment holiday from its pre-moratorium debts while it looks to restructure^[3].

According to the Government’s Insolvency Service main message for England and Wales (published 17 Aug) between the launch of the Breathing Space scheme on 4 May 2021, and 31 July 2021, there were 17,297 registrations, comprised of 17,098 Standard breathing space registrations and 199 Mental Health breathing space registrations^[4].

“The true picture of the impact of company and individual insolvencies to the construction industry is likely not to be fully understood until the 12 months ending 2021. We advise our members to consider alternatives in their debt collection procedures for example, in response to reduced operational running of the courts, taking the opportunity to not send overdue accounts straight from credit control to legal action but using a third party in between will help save on court costs and the frustrations involved of taking legal action.  We advise members to look at their options for collection, take advice from their collections service provider on the best course of action and consider all options, a one-step approach is not always the most effective.” 

Emma Miller, Company Director Top Service Ltd

Post Insolvency Debt Collection Service:

We provide Insolvency Practitioners with a tailored end to end Post-Insolvency Debt Collection Service. We provide our service in collaboration with Silverback Commercial Law who offer competitive rates if legal action is required to recover monies owed. 

What we offer:

• Free of Charge Ledger Consultation
• Collections Process with online access to live information on all cases
• Retention & Contract Collections
• Legal Action to Recover monies owed
• Dispute resolution

What makes us different?

• Our bespoke collection strategies mean that no case is treated the same. Our access to credit information and exclusive trading experiences enables us to change strategy quickly when our incoming intelligence is received, providing excellent results.
• Fast, effective collections. We know that speed is of the essence, so all collections are given top priority.  We don’t just go through the motions, our experienced and highly skilled team members are adept at tricky negotiations, dispute resolution, tracing absconded debtors and thinking outside of the box to achieve tangible results.
• Fully compliant.  We have been trading for 30 years and we have always taken compliance very seriously.  We are authorised by the FCA and Top Service Ltd is a corporate member of the Credit Services Association (CSA).  All senior Top Service staff are members of the Chartered Institute of Credit Management and collections professionals are hand-picked and trained to the highest standards. 
• We have 30 years experience in collecting commercial and contract debts.

To discuss our Post Insolvency Collections Service with a member of our expert team please email insolvencycollections@top-service.co.uk.

Are you struggling to recover the money you are owed?

Contact our helpdesk team today on 01527 518800 to discuss how Top Service Ltd can support and help you protect your business.

^[1] https://www.gov.uk/government/statistics/monthly-insolvency-statistics-july-2021/commentary-monthly-insolvency-statistics-july-2021

^[2] https://www.gov.uk/government/statistics/monthly-insolvency-statistics-july-2021/commentary-monthly-insolvency-statistics-july-2021

^[3] Top Service news: UK Corporate Insolvency and Governance Act: Moratorium

^[4] https://www.gov.uk/government/statistics/monthly-insolvency-statistics-july-2021/commentary-monthly-insolvency-statistics-july-2021

The Corporate Insolvency and Governance Act 2020 introduced provisions to the Insolvency Act 1986 which came into force on 26 June 2020. 

The moratorium is part of a package of significant legislative reforms intended to enhance the UK’s restructuring and rescue culture. The changes allow breathing space for businesses in financial distress giving them an opportunity to explore rescue and restructuring options, free from creditor action. The process was designed to encourage companies to act earlier to restructure debt and improve a company’s chances of success.

The moratorium is focused on the survival of the company rather than the realisation of its assets, with a view to try to save the life of a company as a going concern by effectively allowing a payment holiday from its pre-moratorium debts while it looks to restructure.

The Procedure

The moratorium process is designed to be quick and easy and involves the directors sending a notice to the Court, similar as in an Administration.  The notice requires the directors to make a declaration that the Company is, or is likely to become, unable to pay its debts.

The notice must be accompanied by a statement from a Monitor that they consent to act, and that the process is likely to achieve its goal, which is that the company can be saved as a going concern.

Once filed in Court the notice needs to be circulated to the creditors, employees, pension companies and the FCA, if it is a regulated Company.

The monitor must also ensure that a copy of that notice is filed at Companies House.

The Monitor Role

The Monitor must be a licensed insolvency practitioner, and their initial role is to ensure that the purpose of the Moratorium can be achieved.

The Monitor’s ongoing role is to ensure the conditions for the moratorium to be in place continue to be met and to protect creditors’ interests.

The directors remain in control of the company and will be responsible for the day to day running of the business. However, the Monitor is to have oversight of the Company and its finances.

The Monitor will have a say over what payments can be made, and to review whether sufficient income is being received to cover the costs of the Moratorium process.

The Monitor will also need to be actively involved in any restructuring of the business, to ensure that progress is being made and the purpose of the Moratorium is still achievable.

Eligibility 

Generally, companies are eligible to use the moratorium if:

• They are incorporated under the Companies Act 2006 or they are unregistered but may be wound up under the Insolvency Act 1986 (this category includes overseas companies)
• The directors state that the company is, or is likely to become, unable to pay its debts; and
• The Monitor is of the view that it is likely a moratorium would result in the rescue of the company as a going concern.

Companies who are not in or have not been in an insolvency process within the last twelve months, are eligible to apply.  You cannot have two moratoriums in the any one twelve-month period.

Where the company is subject to an outstanding winding-up petition, the court may make an order for a moratorium only if it is satisfied that a moratorium would achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up.

Banks, insurance companies and other financial institutions are also not eligible. Accordingly, most companies will be eligible to apply for a moratorium, if they can satisfy the purpose, which is that the moratorium is likely to result in saving the Company.

The Division of the Moratorium Debts

The Act divides the company’s debts into three categories:

• Pre-moratorium debts for which the company has a payment holiday
• Pre-moratorium debts for which the company does not have a payment holiday
• Moratorium debts.

The company must continue to pay pre-moratorium debts without a payment holiday and moratorium debts during the moratorium.

Pre-moratorium debts without a payment holiday are those pre-moratorium debts which have fallen due before the moratorium, or which fall due during the moratorium and which are amounts payable in respect of:

• the Monitor’s remuneration and expenses. 
• goods and services supplied during the moratorium.
• wages or salary.
• redundancy payment.
• rent in respect of a period during the moratorium.
• debts or other liabilities arising under a contract or financial services including a loan; agreement.

The company is severely restricted to making any payments towards pre-moratorium debts for which it has a payment holiday.

The effect on legal proceedings/enforcement of rights

During a moratorium:

• A landlord may not exercise its right of forfeiture.
• There can be no enforcement of security (except financial collateral or a collateral security charge).
• There can be no repossession of goods under a hire purchase agreement or exercise of a retention of title clause.
• No legal proceedings or legal process may be raised, carried out or continued (except employment tribunal proceedings, legal processes arising out of such proceedings or proceedings involving a claim between an employer and a worker) in each case without the permission of the court.

During a moratorium creditors and shareholders are restricted from commencing an insolvency process (liquidation, administration, or administrative receivership).

Directors may still put the company into a formal process, and voluntary liquidation is possible if recommended by the directors.

Duration of the Moratorium

The Moratorium lasts 20 business days unless it is extended.

The Monitor has the power to extend the period once for a further 20 business days if they deem it appropriate.

The Moratorium can be extended further if either the Court or the creditors agree, if a CVA has been put forward and is currently pending.  However, the Moratorium cannot last longer than one year.

The Monitor must terminate the moratorium if they believe that:

• the moratorium is no longer likely to result in the rescue of the company as a going concern.
• the objective of rescuing the company as a going concern has been achieved.
• as a result of the failure of the directors to provide information regarding the company required and requested by the monitor, the monitor is unable to carry out the monitor’s functions.
• the company is unable to pay any moratorium debts or pre-moratorium debts for which the company does not have a payment holiday (which as discussed above includes any sums owed to its lenders).

In addition, a moratorium will come to an end:

• if the company enters another insolvency process (administration, including filing a notice of intention to appoint, CVA, liquidation)
• if a restructuring plan or scheme of arrangement is sanctioned
• if the court so orders.
• automatically upon the expiry of the moratorium term. 

In conclusion:

While the moratorium appears to be a very debtor-focused process it has been welcomed as a useful addition to the UK’s restructuring toolkit during these difficult times.

There remains uncertainty around some aspects of the moratorium that will need to be navigated and it will be interesting to see how these are dealt with in practice, hopefully with further clarification from the Courts or amendments to the act.

In respect of large, complex businesses we can see how the process will be very useful; however, to date, the procedure has been used very little.  Only four appointments were made in the six-month period to December 2020, with no appointments being made in the first quarter of 2021.

Whether that will change once the other support measures, most notably the ban on winding up petitions have been withdrawn fully remains to be seen.

Creditor Services 

Dealing with insolvent debt can be difficult and, in some cases time-consuming. Having a business partner to support you through this process can make a huge difference to the success of your claim.

Our Creditor services team at Restart BTi can assist with the entire claims process no matter what type of insolvency you are dealing with. We will lodge your initial claim, deal with any queries, and make sure that important deadlines are met. We will oversee fee approvals on your behalf and call on our own licensed Insolvency Practitioner when we feel that an independent review or investigation may be required.

We can represent clients at meetings or on committees and will ensure that the difficult questions are asked to endeavour to get the best possible outcome for our clients. With our wide network of support, we can engage with other creditors and seek further support to guarantee that your voice is heard.

Our bespoke case management system, Divisi, ensures that we proactively monitor your insolvency portfolio, providing transparent reporting via our web-based portal.

This service is offered to our clients at no charge so if you want to remove the burden of managing your insolvency documentation and enhance your dividend prospects, then please contact Paul Hughes on 01246 959388 for further information.

What makes Top Service Ltd different? 

As the only credit reference and debt recovery agency specific to the construction industry, we make it our mission to ensure our members receive the most up to date, credit information and company trading experiences which can make a real difference between company profit and painful write-offs. 

Are you struggling to recover the money you are owed?

Top Service members have access to an exclusive combination of no collection, no fee debt recoveryservices.

“We welcome the opportunity to talk to you about any bespoke changes you would like to make to our debt recovery procedures to fit the culture you have for maintaining customer relationships, whilst addressing the need to keep cash flow as fluid as possible for your business.Please contact our collections team to talk through any individual cases or to explore how else we can support you,” Emma Miller, Company Director Top service.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

When the first covid lockdown hit in March 2020 many construction businesses stopped trading and for a short time the focus shifted to collecting unpaid invoices and debt recovery. At the time, government support including the furlough scheme supported the collections process and helped businesses to maintain relationships with customers whilst collecting cash. 

Now the economy has fully opened and the financial support is needed to be repaid and / or coming to an end it is important that credit management stays on top of the priority list. We urge our members and the wider construction industry to focus on understanding their customers and suppliers to manage business relationships whilst keeping cash flowing and actively monitoring trading experiences in order to act upon early warning signs.  Above all, ensure your credit control team has the tools and support to be able to be proactive and use an industry specific service that can spot changes in payment patterns resulting in regular, more in-depth and up to date checks being carried out to pick up information quickly.

Emma Miller, Company Director of Top Service answers some of your frequently asked questions to help you improve your credit management processes:

“The construction industry relies heavily on supply chain and excellent customer relations, having to deal with overdue invoices, repeated late and non-payments can not only affect immediate cash flow but the opportunity for repeat business and client referral. In the event that an account moves into dispute, having the time and right approach to work towards a resolution without damaging customer relations or causing negative impact to your projects can be a never-ending cycle. By taking a consistent and robust approach to your business’s credit management process you will minimise your risk of late and non-paying customers.”

Information is key!

Information is key so they say, the more information you can acquire on a potential customer the greater your chances of securing payment on work carried out or supplied. Using a credit application form is the easiest way to ensure relevant and appropriate details of the potential customer are being taken. It doesn’t have to be long winded or lengthy, simply take the basic details you need to open a credit account and protect yourself:

Company Name AND Registration No

The entity of business if not Limited

Names of key people in the business

Contact numbers & email addresses

Using a credit application form is one thing but the key to protecting yourself is in the detail and checking the form and information provided for any anomalies is where you will be able to protect yourself the most.

Check?

• Use a credit reference agency to check you have been approached by a bona-fide company.
• Check the Directors of the Limited company and see if they have a lot of either active Directorships, resignations or insolvent companies.
• Use your credit reference agency to look at the trading history of the business, have other suppliers experienced non-payment or made enquiries about potential fraudulent applications.

Tip: Where you can, make a physical visit to the customer or potential customer if something doesn’t feel right to you. 

Research and Monitor Company Trading History

We urge our members and the wider construction industry to protect their businesses by  actively monitoring trading experiences and acting upon early warning signs.  Don’t wait for the information to come to you, use an industry specific service that can spot changes in payment patterns resulting in regular, more in-depth and up to date checks being carried out to pick up information quickly.

If you already have a trading history with the business, look at the orders that have previously been placed. Some companies will establish a good line of credit with suppliers, placing small, regular orders to give the appearance of a good customer. However, once an order pattern starts to change, ask questions to establish the reason for the change.

Act Early

It is important to react to new information regarding your debtor. For example, how many other people do they owe, is there a new CCJ, has the credit limit dropped? If so, why? This is all information you should be reacting to. For example, if a new CCJ is registered then you should skip a few steps in your credit control process and get it to a third party asap. Alternatively, pick up the phone and talk to your customer. It would not be unusual for you to be monitoring the customer so it should come as no surprise to them that you know about the new information.  

Do not ignore your gut feelings, noise on the ground or unusual trading patterns with the business. For example, why is the business asking for much more than usual and why are they not answering your call or following up on an email when they normally would? Has there been a sudden change in the way payment is received? 

Ideally for the best chance of collection a debt should be no longer than four weeks overdue before passing to a third party. At Top Service we would suggest no more than three letters are sent in-house. If they haven’t responded then they are most likely ignoring you and it will be prudent to refer swiftly into the next stage of your collection process. Act on information early and protect your business from the impact of bad debt. 

A one size fits all approach should be avoided

Look at your options for collection, take advice from your collections service provider on the best course of action for you and your customer. A one-step approach is not always the most effective. Above all, ensure your credit control team has the tools and support to be able to be proactive.

Know your rights

For commercial debts you can claim interest, compensation and costs of using third party collectors when applying the statutory legislation for late payment. Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim interest at a rate of 8% above base rate and a compensation figure, depending on the value of the debt you are collecting:

If your collection costs are more than the compensation figure you are claiming, you can claim the surplus under the late Payment of Commercial Debts regulations 2013.

If you are unsure about what interest and other charges you are entitled to contact us for FREE advice.

Summary:

1. Carry out robust and consistent financial processes.
2. Information is key. Use a credit application form to ensure relevant and appropriate details of the potential customer are being taken.
3. Monitor company trading history.
4. Act Early. It is important to react to new information regarding your debtor.
5. A one size fits all approach should be avoided. Look at your options for collection, take advice from your collections service provider on the best course of action for you.
6. Know your rights. When it comes to claiming interest, whether it is contractual interest or statutory interest, you are entitled to it.

Do you need help with your credit management process? If so, contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

Within this article we take a high-level look at the different types of corporate insolvency processes. As with every insolvency process these can be complicated and time consuming so, please feel free to contact us should you have specific questions about any of the following processes. 

Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) is a legally-binding agreement between a company and its creditors in settlement of its liabilities. The Proposal can take any form, for example, contributions from future profits, sale of assets, third party contributions or any combination. 

Unlike other insolvency procedures, in a CVA, the insolvency practitioner does not replace the directors of a company. Instead, the insolvency practitioner will act as a ‘nominee’ (prior to the CVA’s approval) and ‘supervisor’ (after the CVA’s approval) to ensure the terms of the CVA are being met by the company.

Creditors are given time to consider the CVA proposal prior to their meeting, which usually takes place on the same day as the meeting of members. Creditors can question the directors and insolvency practitioner about the company’s position and the CVA proposal if they have submitted a claim and are entitled to vote.

Voting takes place, with a majority of 75% (by value of debt) needed to pass the proposal. A second vote excludes any connected parties, and if no more than half of these creditors vote against it, the proposal is passed and the CVA becomes legally-binding on all parties.

Following approval, creditors may apply to the Court if the CVA’s terms are unfairly prejudicial or if there was some material irregularity in the procedure leading up to its approval. Once approved the company can continue to trade and the directors remain in control.  The CVA is monitored by a supervisor who must be a licensed insolvency practitioner.  Generally, a CVA arrangement usually lasts for three to five years.

The CVA’s terms are then carried out in much the same way as any other commercial contract. If all creditors are paid what the CVA has promised, or if the supervisor is satisfied that it has substantially fulfilled its aims, the CVA will complete, and any outstanding balances will be written off.

If the company does not satisfy the terms of the CVA, for example, if it falls into arrears with its monthly payments, the CVA’s terms will often have provisions for how to deal with its termination. A CVA which terminates may lead to the company entering a subsequent insolvency procedure such as liquidation.

Administration

When a company is facing financial difficulties, it can be placed into administration. This means that, during the period for which it is in administration, the affairs, business, and property of the company will be managed by a person (‘the administrator’) appointed for that purpose. The administrator must be a licensed insolvency practitioner.

A company may be placed into administration by an order of the Court, on application by, amongst others, the company, its directors, one or more creditors, or, if it is in liquidation, its liquidator.

Without an order from the Court by the direct appointment of an administrator by the company, its directors or a creditor who holds comprehensive security of a type which qualifies him to make such an appointment.

With an Administration there is an automatic moratorium which means that it is not possible for a creditor to commence or continue legal proceedings against the company or its assets.

There are three main statutory purposes of an administration:

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

If a creditor is owed money by a company that has gone into administration, often the best option is to submit details of its claim on a proof of debt with supporting evidence and wait for the administrator to adjudicate upon that claim. The administrator must notify all known creditors of his appointment as soon as reasonably practicable.

The administrator’s Proposals for achieving the purpose of the administration must be issued to creditors within 8 weeks and the proposals will be agreed by creditors at a decision procedure to be held within 10 weeks

The proposals will be passed if most creditors vote in favour. Should the proposals be rejected, a decision can then be made by the courts on how to proceed. A creditors’ committee may be established at the decision procedure to assist the administrator.

The administrator can call further meetings of creditors as and when necessary and are obliged to do so if creditors with 10% or more (by value of debt) request it.

An administration automatically ends after one year however this period may be extended with the agreement of the creditors or the permission of the court.

When the administration concludes the company may be returned to the control of its directors and management; go into liquidation; dissolved (if there are no funds for distribution to unsecured creditors); or if a voluntary arrangement has been agreed during the administration, the arrangement will continue according to its terms. 

Compulsory liquidation

A compulsory liquidation occurs when a company is wound up by an order of the Court.

A Winding Up Order is usually made when a creditor issues a Winding Up Petition against a creditor for unpaid invoices.  If a Court is satisfied that the liabilities are unpaid, then a Winding Up Order will be made, and the company will go into liquidation with The Official Receiver being appointed Liquidator.

The Official Receiver must decide within twelve weeks of the winding-up order whether to call a meeting of creditors to appoint an independent licensed insolvency practitioner to act as liquidator.  If he does so, then the appointment of a liquidator will be made by a simple majority of creditors. A creditors’ committee may be established at the decision procedure to assist the liquidator.

The liquidator will write to all the known creditors asking them to submit a claim. A claim must be submitted to the liquidator in writing, providing supporting evidence, e.g., copy statements, invoices, correspondence etc. 

This will allow the liquidator to adjudicate on the claim using the company’s records and any other available information. The liquidator may discuss the claim with the directors and ask for additional information in support of the claim if the Official Receiver remains in office the only reports that will be sent to creditors will be on closure of the liquidation.  An independent liquidator is also obliged to submit annual progress reports.

The liquidation is complete when all the assets have been realised, all creditors’ claims have been adjudicated (where there are sufficient funds) and net realisations after expenses of the liquidation have been distributed to the creditors. 

A final report of the liquidator is sent to creditors at the end of proceedings and unless creditors object to the release of the Liquidator, the liquidation will be closed.

Creditor Services 

Dealing with insolvent debt can be difficult and, in some cases time-consuming. Having a business partner to support you through this process can make a huge difference to the success of your claim.

Our creditor services team at Restart BTi can assist with the entire claims process no matter what type of insolvency you are dealing with. We will lodge your initial claim, deal with any queries, and make sure that important deadlines are met. We will oversee fee approvals on your behalf and call on our own licensed Insolvency Practitioner when we feel that an independent review or investigation may be required.

We can represent clients at meetings or on committees and will ensure that the difficult questions are asked to endeavour to get the best possible outcome for our clients. With our wide network of support, we can engage with other creditors and seek further support to guarantee that your voice is heard.

Our bespoke case management system, Divisi, ensures that we proactively monitor your insolvency portfolio, providing transparent reporting via our web-based portal.

This service is offered to our clients at no charge so if you want to remove the burden of managing your insolvency documentation and enhance your dividend prospects, then please contact Paul Hughes on 01246 959388 for further information.

Are you struggling to recover the money you are owed?

Top Service debt recovery service is operating normally. Our team are proving that their skills are second to none with the results we are achieving during this challenging time. Top Service members have access to an exclusive combination of no collection, no fee recovery services.

“We welcome the opportunity to talk to you about any bespoke changes you would like to make to our debt recovery procedures to fit the culture you have for maintaining customer relationships, whilst addressing the need to keep cash flow as fluid as possible for your business.Please contact our collections team to talk through any individual cases or to explore how else we can support you,” Emma Miller, Company Director Top service.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

National Insolvency figures published (16 July 2021) by the Government’s Insolvency Service have indicated a 19% increase in business insolvencies in England and Wales compared to the previous month’s figure of 1,014, this is a rise of 63% compared to June 2020’s figure of 741^[1].

The number of registered company insolvencies in June 2021 was 1,207 this was 63% higher than the number registered in the same month in the previous year (741 in June 2020), however this is 18% lower than the number registered two years previously (pre-pandemic; 1,466 in June 2019)^[2].

The overall reduction in company insolvencies compared to June 2019 can be attributed to the restrictions placed on winding up petitions giving a much lower number than of compulsory liquidations. To help protect businesses from insolvency, several changes were introduced under the Corporate Insolvency and Governance Act (2020) (Coronavirus) including the restriction of statutory demands and winding-up petitions which have previously been extended on several occasions up until 30^th September 2021. ^[3]

“The true picture of the impact of company and individual insolvencies to the construction industry is likely not to be fully understood until the 12 months ending 2021. We advise our members to consider alternatives in their debt collection procedures for example, in response to reduced operational running of the courts, taking the opportunity to not send overdue accounts straight from credit control to legal action but using a third party in between will help save on court costs and the frustrations involved of taking legal action.  We advise members to look at their options for collection, take advice from their collections service provider on the best course of action and consider all options, a one-step approach is not always the most effective.” Emma Miller, Company Director Top Service Ltd

Are you struggling to recover the money you are owed?

Our team are proving that their skills are second to none with the results we are achieving during this challenging time. Top Service members have access to an exclusive combination of no collection, no fee recovery services.

“We welcome the opportunity to talk to you about any bespoke changes you would like to make to our debt recovery procedures to fit the culture you have for maintaining customer relationships, whilst addressing the need to keep cash flow as fluid as possible for your business. Please contact our collections team to talk through any individual cases or to explore how else we can support you,” Emma Miller, Company Director Top Service Ltd.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.

^[1] https://www.gov.uk/government/statistics/monthly-insolvency-statistics-june-2021/commentary-monthly-insolvency-statistics-june-2021

^[2] https://www.gov.uk/government/statistics/monthly-insolvency-statistics-june-2021/commentary-monthly-insolvency-statistics-june-2021

^[3] /news/government-poised-to-further-extend-moratorium-period-on-winding-up-petitions-and-change-in-practice-to-vat-high-court-enforcement-fee/

As someone who might be owed money one of the first questions you may ask yourself is am I a creditor in this liquidation? You are a creditor if the company owes you money. You may be owed money because you:

• supplied goods or services to the company.
• made loans to the company.
• paid for goods or services that you have not received.
• are an employee owed money for unpaid wages and other entitlements.

A ‘contingent creditor’ is owed money by the company if a certain event occurs (e.g. if they succeed in a legal claim against a company).

Creditors will either be secured or unsecured. A secured creditor holds a security interest, such as a mortgage/charge, in some or all the company’s assets, to secure a debt owed by the company. Lenders might require a security interest in company assets when they provide a loan. Conversely an unsecured creditor does not hold a security interest in the company’s assets. Unsecured creditors can be preferential which predominantly relates to employee wage arrears and holiday pay.  

Since December 2020, HMRC became a second-tier preferential creditor for unpaid taxes including VAT, PAYE and employers NI deductions. Unsecured creditors can be non-preferential which includes all other types of creditors, including trade & expense creditors. Creditor’s Voluntary Liquidation is the most common type of insolvency, below is an overview of the process and the deadlines that will need to be met. 

Initial Notice of Liquidation 

Following the decision of the director(s) to commence the Liquidation process, shareholders will be asked to pass resolutions to wind up the company and appoint a liquidator at an EGM or by the written resolution procedure. Creditors will be invited to participate in a decision procedure.

The company’s creditors will receive a minimum three days’ notice of the decision procedure however in most cases more notice is given.

The first thing you are likely to receive when a company is looking to go into liquidation is a notice of a decision procedure by post. This initial pack of documents can appear to be quite daunting to the untrained eye.  The notice will outline the specific details of the type of procedure and deadlines for the return of any documents before the decision date.  There are some key documents to look out for in the pack, the notice that contains deadlines and contact information, a proof of debt to register your claim and in some cases a voting form / proxy to enable you to vote on specific resolutions put forward by the incumbent insolvency practitioner. 

One of the key documents you will need to complete to register your claim is the proof of debt form which is the document on which a creditor submits details of their claim. This form is a simple document to complete but again if you are unaccustomed to completing them on a regular basis it may seem a little daunting. 

To substantiate the claim in the proof of debt form it is a good idea to provide supporting documentation by way of statement, sales invoices, or delivery notes. If the claim differs significantly from that held in the companies’ books you may be asked for further information. It is often the case that the figures differ slightly and at this initial stage you do not need to worry about that as you will have plenty of time to substantiate your claim throughout the liquidation process.  

Recent legislative changes have altered the requirement for a liquidator to automatically hold ‘in-person’ creditors’ meetings unless a specific number of unsecured creditors request it.

The Small Business Enterprise and Employment Act 2015 removed physical meetings as the default mechanism for obtaining decisions from creditors. Instead, insolvency practitioners are now required to use decision making procedures or the deemed consent procedure. 

The removal of the physical meeting as the default option in the case of a voluntary liquidation was taken because most creditors meetings saw only the appointed insolvency practitioner and the director of the insolvent company attendance. Physical creditors meetings also incurred specific costs and time which not only slowed down the pace of the liquidation, but also made it more expensive.

The procedure known as the deemed consent procedure is now used by the vast majority of Insolvency Practitioners as there is a general belief that it expedites the process. If there are no objections or concerns from the creditor then the company will automatically enter liquidation at 23.59pm on the decision date without the need for a meeting.  

Alternatively, a virtual meeting of creditors may be called. Virtual meetings are called in a similar way to physical meetings. The insolvency practitioner must give notice of their intention to call a virtual meeting along with details of the proposed decision, the date of the meeting, the platform to be used and any passwords or access codes of the creditors, this is where a meeting is held by means of a conference or video call.  This has the advantage of creditors being able to attend and be heard at the meeting without having to travel to a physical meeting.

A virtual meeting of creditors must also be advertised in the London Gazette, as a physical meeting would be, and involves proxy forms, which can be delivered anytime up to the start of the meeting. Proofs of debt will also need to be delivered to the insolvency practitioner usually by 4pm the day before the meeting. All the deadlines will be clearly set out in the notice. As this is a meeting so proxies will be required. The Insolvency Service have commented that they see virtual meetings operating in practice as physical meetings do, with most creditors using proxies. 

With both the Deemed Consent and virtual meeting process a creditor has the right to summon a physical meeting of creditors. In order to object, you are required to meet a certain threshold, albeit with the Pandemic such a meeting is unlikely but not impossible with the appropriate social distancing in place. 

Creditors usually have five business days after the delivery of the notice of the decision-making procedure to deliver their request for a meeting by either value or number, or ten individual creditors can request that a meeting of creditors is held. Objections to the decision process must be submitted to the convenor, in writing along with a proof of debt. 

The convenor is then responsible for checking whether any requests for a physical meeting have been made and whether they meet any one of the thresholds set out above.

If the required value of creditors does object, the procedure will terminate without the decision having been made and the office holder is then required to seek a decision from creditors using an alternative decision procedure. It should be noted that deemed consent cannot be used to seek a decision where that process has already been objected to. The convenor must then send the notice summoning the physical meeting not later than three business days after one of the thresholds has been met. 

Creditors wanting to vote but not attend a physical meeting in person will be required to submit proxies. Creditors may be permitted to attend a physical meeting remotely if they are unable to attend. It should be noted that deemed consent cannot be used to seek the approval of remuneration (fee) of a liquidator.

The Meeting of Creditors 

Prior to the Decision Date or the effective date of Liquidation, creditors will also be provided with a document called an Estimated Statement of Affairs of the Company. This is a document that sets out the financial position of the company, detailing its assets and liabilities and overall deficiency. 

In addition to the statement of affairs a report of the directors will be made available which provides statutory information, a history of the company including reasons for its failure, historic accounting information, the Statement of Affairs and a deficiency account.  The deficiency account tries to reconcile the position as per the last accounts to the deficiency shown in the Statement of Affairs. 

Most creditors base their questions on the content of the above reports along with the experience they have had whilst trading with the company that’s going into liquidation.

Where there is a virtual or physical meeting, the following will be discussed:

• A general introduction as to those present at the meeting.
• Information as to whether the proposed liquidator has had any relationship prior to this liquidation with the company, it must be disclosed to the creditors.
• The creditors will be presented with the director’s report and Statement of Affairs.
• The creditors are invited to ask any questions of the director(s) 
• The creditors may ask the liquidator to investigate any specific areas.
• The creditors are entitled to nominate a different liquidator.
• The creditors are entitled to form a liquidation committee.
• If no liquidation committee is formed, creditors will agree to a number of other resolutions including the liquidator’s remuneration.

A creditor is entitled to ask the company’s director any questions. However, they must be relevant to the liquidation and the company. If the liquidator deems the question inappropriate, they can intervene. The creditors’ conduct is expected to be always professional; threats of violence or bad language are likely to lead to a creditor being dismissed from the meeting.

In some cases, a creditor or group of creditors may choose to have their insolvency practitioner, solicitor or other professional in attendance at the meeting to ask any questions on their behalf. The director of the company is also entitled to have their solicitor present.

At least one director of the company must be present and will be responsible for chairing the meeting. In practice, it is usually the liquidator that conducts the meeting on behalf of the company. 

The meeting is usually no longer than 40-50 minutes. However, should there be complex issues to resolve from the discussion, or the creditors have a lot of questions, it can be much longer. 

At the formal part of the meeting voting takes place on whether to accept the resolutions put forward i.e. the appointment of a specific liquidator to alternative, with a majority (by value of debt) being required to pass the resolution. Once the resolutions have been agreed and approved, and the director has signed the relevant documents, the creditors’ meeting is closed. 

Creditor Services 

Dealing with insolvent debt can be difficult and, in some cases, time-consuming. Having a business partner to support you through this process can make a huge difference to the success of your claim.

Our Creditor services team at Restart BTi can assist with the entire claims process. We will lodge your initial claim, deal with any queries, and make sure that important deadlines are met. We will oversee fee approvals on your behalf and call on our own licensed Insolvency Practitioner when we feel that an independent review or investigation may be required.

We can represent clients at meetings or on committees and will ensure that the difficult questions are asked to endeavour to get the best possible outcome for our clients. With our wide network of support, we can engage with other creditors and seek further support to guarantee that your voice is heard.

Our bespoke case management system, Divisi, ensures that we proactively monitor your insolvency portfolio, providing transparent reporting via our web-based portal.

This service is offered to our clients at no charge so if you want to remove the burden of managing your insolvency documentation and enhance your dividend prospects, then please contact Paul Hughes on 01246 959388 for further information.

To help protect businesses from insolvency, several changes were introduced under the Corporate Insolvency and Governance Act (2020) (Coronavirus) including the restriction of statutory demands and winding-up petitions which have previously been extended on a number of occasions up until end of 29^th June 2021, means winding up petitions are prohibited if the statutory demand served was between March 2020 and September 2020.  

Under the Corporate Insolvency and Governance Act it is expected that a further extension to the moratorium period for issuing winding up petitions and statutory demands, against companies, will be announced. If passed, it will see a delay of 3 months to the 30^th September 2021. 

UK Government is also amending VAT on High Court enforcement fees as a change in practice on charging VAT on High Court Enforcement fees, payable under Writs of Control, is set to come into effect soon.  The suggestion is that this will take place from 2 August 2021. 

Ahead of new guidance from the UK Government, prompted by an ongoing court case, the High Court Enforcement Officers Association (HCEOA) is recommending a change in the treatment of VAT on High Court Enforcement fees. This change is particularly relevant to cases where the judgment creditor is VAT registered.

If the judgment creditor can recover VAT from HMRC:

•  Where a judgment creditor is VAT registered, the HCEO will not recover VAT on their fees from the judgment debtor

•  Instead, the HCEO will deduct a sum equivalent to the VAT element of their fees from the funds recovered from the judgment debtor and pay this to HMRC

•  An invoice addressed to the judgment creditor marked ‘paid’ will be forwarded to the judgment creditor from the HCEO (via SBL), along with the balance of funds they are due

•  The judgment creditor can then claim this VAT from HMRC in the normal way

If the judgment creditor cannot recover VAT from HMRC:

•  The HCEO will continue to collect a sum equivalent to the VAT from judgment debtors

•  This sum will continue to be paid to HMRC

•  In line with expected Government guidance, the HCEO will issue a VAT invoice to the judgment creditor via SBL.

Emma Miller, Top Service Company Director says;

“With court fee’s increasing and the restrictions on winding up petitions remaining in place we are seeing more and more customers reviewing their current collection methods and looking for alternatives to court action. At Top Service we have adapted our collections methods to suit the struggles of contacting companies who are working from home and potentially on furlough – achieving great results. We advise members to look at their options for collection, take advice from their collections service provider on the best course of action and consider all options.” 

Are you struggling to recover the money you are owed?

Top Service debt recovery service is operating normally. Our team are proving that their skills are second to none with the results we are achieving during this challenging time. Top Service members have access to an exclusive combination of no collection, no fee recovery services.

Contact our helpdesk team today on 01527 518800 to discuss how Top Service can support and help you protect your business.