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.

The increased threat from scam and fraudulent activity has prompted Companies House (21^st June 2021) to provide updated guidance on What to do if you think you’ve spotted a scam pretending to be from Companies House, giving stark examples of scam emails, letters and telephone calls.

Companies House report examples that include businesses and individuals being contacted and asked for payment of a late filing penalty over the telephone, people claiming to be from Companies House requesting details of their company’s directors or asking for authentication codes.  Spurious emails containing official looking documents as attachments or phishing emails, one claiming that hundreds of phone calls and emails have been sent in your company name asking customers to click a link to see what type of information has been sent. 

Companies House advise that they never contact you by telephone to find out who your officers are or ask for secure information. If anyone calls claiming to be from Companies House asking for this information – their advice is to try to get a return telephone number and contact them immediately on 0303 1234 500.

If you receive a suspicious email, you should report it to Companies House via  phishing@companieshouse.gov.uk.

“At Top Service we are now seeing more and more potential fraud being reported from bone-fide company details being used without their knowledge, to fake companies being set up to obtain goods fraudulently and an increase in scam calls and emails claiming to be from official companies in particular Inland Revenue, Companies House and rogue collection officers is a real threat. At Top Service we urge our members and the wider construction industry to minimise the risk of fraud by carrying our formal checks before providing company and personal information to any third party or when providing goods on credit, it is vital to not just ask and record details but verify them and check, check, check.” Emma Miller, Company Director at Top Service Ltd.

What to check and how

Check phone numbers, dial them or use the internet to search for any reports of misuse. Once a fraudster has received the information they need, leaves your depot or takes delivery that is likely to be your last contact with them. Is the telephone number ringing and is it a normal tone? If it goes to the answerphone, is the mailbox full? This is a sign that messages are not being returned. Why would an active business not return and delete messages?

Send a confirmation email – we hear of so many people whose initial suspicions to fraud are raised when they email the invoice and the email bounces back. Check it first – a confirmation email thanking the customer for their application or order can help to pre-warn you of any problems and is also customer service friendly so your customers will see this a great customer service tool!

The internet opens a lot of avenues to carrying out non-intrusive checks. Look at the addresses you have been given, are they active trading addresses (as opposed to a mailbox)? Is it a residential address when you would expect it to be a business address or vice versa? There could of course be perfectly legitimate reasons for having numerous trading and / or delivery addresses but taking the time to check could be what will save you! Never allow goods to be cross loaded to unidentifiable vehicles waiting at the delivery location.

Search the business name and or directors / proprietor / partners names with other suppliers you may come across out of area news reports or other information that will help you.

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. Use a credit reference agency to check you have been approached by a bone-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.
• Where you can, make a physical visit to the customer or potential customer if something doesn’t feel right to you. 

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

In short:

• Confirm the details on the application are true, using credit information, the internet or ID checks
• Check the condition of the business applying for goods on credit
• Is the order consistent with past transactions or as you would expect it to be?
• Satisfy your gut feeling and if you can’t, assess the risk and if needs be decline the application.

Testing is also important. It will help to ensure new processes and current processes are providing the protection you need. Internally, submitting a fictitious order or application will help you to track if you are getting the desired outcome.

What if you are a victim of fraud?

Report it – Call 101 or report to Action Fraud 
Share it – Sharing your experiences is the quickest way to stop fraudsters in their tracks. Talk to your trade association or industry specific credit information agency who will be able to make others in your industry aware.

For further information or support relating to fraud prevention or anything else relating to credit management please contact us:

Top Service Ltd
Tel: 01527 518800
Email: helpdesk@top-service.co.uk

2-3 Regents Court
Far Moor Lane
Redditch
B98 0SD

The Insolvency Service has announced the High Court’s decision to wind up rogue recovery service Global Investigations and Recoveries Limited (17 May 2021). 

The Government press release published 2 June 2021^[1], states that Global Investigations and Recoveries Ltd failed to ‘co-operate with the Insolvency Service’s enquiries and did not deliver any accounting or trading records. Investigators could not establish the full extent of ‘harm caused ‘by Global Investigations and Recoveries but it is understood that one potential victim was quoted £4,000 to engage with the rogue ‘debt collection’ service.

“At Top Service we regularly field enquiries from customers when they are approached by agencies claiming they can collect from insolvent companies. Our advice is to remain vigilant and to be wary of anyone who claims they can collect money from an insolvent business, it isn’t impossible, but claims must meet certain criteria. Over the years supporting the construction industry we have seen many bogus debt collection businesses come and go, we advise our customers to carry out extra due-diligence checks whenever an agency asks for money up-front for collection work.” Emma Miller Company Director at Top Service Ltd.

Construction companies’ write-off thousands of pounds because of bad debt caused by late and non-payment each year and the sector overall ranks high on the national insolvency table which makes businesses operating in the built industry especially vulnerable to fraud and the target of unscrupulous phoenix companies.  

“There are certain occasions when limited liability will not fully protect a company’s directors or shareholders and they may subsequently be held responsible for the debts of their company. Where a Company has gone through a formal / terminal insolvency procedure an office holder would look to investigate the company and follow up with any wrongdoing in order to maximise returns to creditors. Its therefore unlikely an outside agency would be able to take action off their own back unless instructed to do so by a creditor or Insolvency Practitioner. The most typical examples where it may be the case that a claim could be made against a Director personally include, 

Preference:  placing a creditor or guarantor in a more favourable position than would have been the case if the payment had not been made. Transactions at undervalue: selling assets for less than their true value.” Paul Hughes, Restart BTI

At Top Service we urge the construction industry to seek advice and do the necessary background checks when approached by any individual or company claiming to be a debt recovery specialist. At Top Service Ltd we take compliance very seriously having been trading for 30 years we are known for our attention to detail and high-quality customer service. All senior Top Service staff are members of the Chartered Institute of Credit Management and our collections professionals are hand-picked and trained to the highest standards.  Top Service Ltd is authorised by the FCA and corporate member of the Credit Services Association (CSA).  We work in partnership with trusted law firm Silverback Commercial Law Services Ltd who also have an excellent compliance record.

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.

^[1] https://www.gov.uk/government/news/rogue-recovery-specialists-wound-up-in-court?utm_medium=email&utm_campaign=govuk-notifications&utm_source=b2d55ed3-f1fe-43ae-bf1c-f5d2422c6ade&utm_content=daily

Every year, thousands of insolvency notices are sent to creditors of companies that are subject to some sort of formal insolvency procedure. In our experience, these notices are either disregarded or treated with apathy due to the general perception that the insolvency of a customer will lead to a full debt write off and dividend rates are perceived to be poor. 

This article will focus on liquidation, the most common insolvency procedure. Since registered companies became available to the investing public, the Joint Stock Companies Winding-Up Act 1844 and all its successors contain a route for a company’s life to be brought to an end.

The basic purpose of liquidation is to conclude a company’s activities and to sell off assets ‘liquidate,’ turn chattels into ‘liquid assets’ or money to pay creditors, or shareholders if any value remains. Either the company (its shareholders or directors) can initiate the process through a “voluntary liquidation”, or the creditors can force it through a ‘compulsory liquidation.’ 

Over the years the insolvency profession has tried to introduce legislation and adopt practices to improve creditor engagement and reduce the costs of all insolvency processes. However, from our experience we do not believe that this has had the desired effect and presently we feel that creditor engagement is at an all-time low.

Creditors of insolvent estates should be aware that they have a meaningful role to play in the insolvency process which could significantly improve the prospects of any return to them.

What will I receive?

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. With this notice you are likely to receive details of the type of procedure and deadlines along with a proof of debt and voting form / proxy to enable you to participate in the insolvency process and lodge your claim. In our next article we will talk more about the mechanics of this process in relation to a liquidation.  

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. 

This procedure is called a deemed consent procedure which the vast majority of Insolvency Practitioners now use as there is a general belief that it expedites the process. In our view this procedure has further alienated creditors as they are unable to question a director at a meeting of creditors. 

At least 10% of creditors by number or value (or 10 individual creditors) can request that a meeting of creditors is held, otherwise proposals and notices can be sent via electronic means.

Prior to the decision date you will receive the statement of affair for the company which sets out its assets, liabilities and likely dividend prospects. This document should be received no later than one working day prior to the procedure. 

Appointment of liquidator

A liquidator is appointed firstly by shareholders however creditors have the right to appoint their own liquidator should sufficient support be obtained by other creditors. The liquidator is appointed by the majority of the creditors voting by the decision date. 

Creditors Committee

During any insolvency proceedings, unsecured creditors have the right to form a creditors’ committee. This usually consists of between three and five members.

Forming a committee can ensure that creditors have a ‘voice’ during the insolvency process. Creditors often feel that they are overlooked or that there is a veil of secrecy around the insolvency which prevents them from having any influence on the outcome.

The role of the committee is to oversee the insolvency process on behalf of unsecured creditors. The establishment of the committee and their participation in the process can address some of the concerns and ensure that proper consideration is given to their interests.  The committee is of particular use on more complicated insolvencies where there are matters for the office holder to investigate and its members can provide invaluable help to them by acting as a ‘sounding board’ for future decisions.

Committees often pass several resolutions one of which is in relation to agreeing the costs of the procedure. Creditors gain a better understanding of the process and costs when acting on a committee. 

●      Committee members do not receive payment for their role but are entitled to claim for their reasonable travelling expenses.

●      Committee members can request a meeting with the office holder at any stage of the proceedings, but these are usually agreed mutually in advance.

●      A committee member is also entitled to receive regular reports from the office holder to update them on their progress.

What other steps can I take to protect my position?

If you have supplied goods to the company and you have a ‘Retention of Title Clause’ within your terms of trade, you may be able to make a claim for their return which may reduce your overall exposure. 

Whilst this is a technical area, in summary, if you can identify goods on site that specifically relate to an outstanding invoice these can be reclaimed if they have not been irreversibly processed into another product. 

Other problems can arise when a creditor assumes that they have a right to reclaim unpaid stock, but the debtor company refuses to recognise the clause, or claims to have no knowledge of its existence.

It is good practice to contact the liquidator as soon as you are aware of the insolvency. You should send a copy of your terms of trade, a statement showing the extent of your debt, relevant invoices and other supporting documentation and enquire if any of your goods remain on site. 

If you have credit insurance, then your broker should be notified of the insolvency and you should ensure that you adhere to the policy conditions in order that a successful claim can be made. We have found that it is often the case that the insurer will require some sort of confirmation of debt from the office holder for the claim to succeed.

If you are registered for VAT, once the debt is over six months old you can reclaim the VAT element back from HMRC

Dividend Payments 

If there are sufficient assets to declare a dividend then there is specific hierarchy as follows: 

Fixed Charge Holder

First Tier Preferential Creditors – Employees

Second Tier Preferential Creditors – HMRC (Taxes Deducted at Source) 

Unsatisfied Floating Charge Holders

Non-Preferential Unsecured Creditors 

The vast majority of trade creditors will fall into the last category. If you did not submit your claim at the onset of the insolvency, you will be given one final opportunity to do so otherwise you will be excluded from the dividend.

If a liquidator formally rejects your claim, you should in the first instance try to seek a compromise with the liquidator. If no agreement is reached within 21 days, you will have to apply to the court for adjudication on the matter.

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.

The creditor services team at Restart BTi can assist with the entire claims process. We will lodge your initial claim, deal with any queries and ensure 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 are delighted to represent clients at meetings or on committees and will ensure that the difficult questions are asked to make certain we 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.

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

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

This article is produced in collaboration with Paul Hughes Director for Restart BTi Licensed Insolvency Practitioners

Today (Tues 11^th May 2021) following consultation by the courts on the alignment of court fees. The online discount received for any work issued through MCOL (money claims online) is to be cancelled from the 18^th May 2021. From that date all online court fees will be increased to the current standard paper fee.

The new fee structure is outlined below (provided by trusted partner Silverback Law)

Claims:

Bailiff:

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.

To a business recovery and insolvency expert it may be obvious that a company is heading towards financial difficulty or even insolvency proceedings.  A creditor however may not see the warning signs when a business owner is “putting their head in the sand” and avoiding the reality of the situation.   

Insolvency is not an instant or immediate state. It can take weeks, months or even years for a faltering business to get to the point that it is insolvent.

The two basic methods of assessing whether a company is insolvent are as follows:

Cash Flow Test

Is the business able to pay its debts as and when they fall due or in the reasonably near future? 

Highlighted below are some of the typical indicators we come across prior to a business failing. These on their own may not indicate a failing company but in conjunction with each other may indicate issues. 

If a customer is displaying some of the following behaviours it may be worth probing deeper before extending further credit. Remember that emotions cannot play any part in making that decision.

• Has the customer exceeded their agreed credit terms?
• Have requests for an extension or renegotiation on prices been made?
• Have there been several broken promises of payment?
• Are they making unnecessary invoice disputes to delay matters?
• Are they unable to produce up to date financial information when undertaking credit reviews?
• Are regular reviews of external credit reports undertaken to monitor for detrimental data?
• Are they subject to any pending legal action e.g., CCJ or winding up petition?
• Is the customer ignoring your correspondence and calls?
• Have you had to repeatedly place your customer on stop?
• Has their credit rating been reduced?
• Have they tried to seek credit terms with alternative suppliers?
• Do they have repayment plans with other creditors?
• Do they have a Time to Pay Arrangement with HM Revenue & Customs?
• Has the business lost a key customer that it has not or is unable to replace? 

• Is there an alternative competitor in the market that could potentially reduce their market share?
• Does the customer only have a small number of key clients and how are these performing, have they been subject to a bad debt or insolvency?
• Are they using invoice financing or other funding more frequently?
• Have they sold or refinanced assets?
• Are you able to obtain trade credit insurance for the customer?
• Is the customer laying off staff or making redundancies?

Balance Sheet Test

Are the company assets less than its liabilities?  It is not unusual for a company to have net liabilities so this should be considered alongside the cash flow test.  

As a credit manager it is sometimes difficult to form a view on the publicly available information given that it is historic and does not necessarily reflect the current financial position. This is where an industry specific credit information provider comes into play. This type of credit information provider can provide data gathered from other traders in your industry. This information will build a picture of how the customer is paying other trade suppliers at the current time. 

• Has the company continually required the use of an overdraft?
• Has it submitted its statutory accounts on time?
• Do you have open conversations with your customer?  Are they indicating any financial issues within the company?  Is there a high turnover of staff?  Are there problems with the landlord?
• How old are the directors?  Is any succession planning evident?
• Have long standing directors suddenly resigned?
• Has the business moved to smaller premises?
• Is the company showing reduced profit margins?  It is far too easy to be misled by thinking high turnover leads to bigger profits. If overheads are also growing at an exponential rate, the profitability could in fact be reduced. An often-used quote in the insolvency profession is “turnover is vanity, profit is sanity.”

Legal 

A further test to consider is whether your customer is subject to any pending legal action. 

If the customer is subject to a statutory demand or a County Court Judgement, these are precedents that a creditor could use to follow up with a Winding up Petition after which your customer could be forcibly liquidated. Legal action may be taken as a strong warning signal of pending insolvency if the matter cannot be resolved. 

Trading History

With creditors only being able to issue a winding up petition in certain circumstances during the pandemic, it is more important than ever to closely monitor your customers performance and ensure that you have a robust credit and collection policy. 

Top Service is a key stakeholder in your business credit management function. Our credit reports include everything you need to know before extending further credit.  

Where you might be struggling to collect on your outstanding invoices the effective collections service offered by Top Service is based on a combination of skilled collectors with a pro-active approach to collections, to help your overdue invoice become your customer’s priority for payment.

We along with our trusted partners can offer you support and advice on all credit management matters. 

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

This article is produced in collaboration with Paul Hughes Director for Restart BTi Licensed Insolvency Practitioners

This week (25^th March 2021) the government has updated the Corporate Insolvency and Governance Act by extending the moratorium period for issuing winding up petitions and statutory demands, against companies, to the 29^th June 2021  in order to relieve pressure being placed on businesses dealing with coronavirus.

To help protect businesses from insolvency a number of 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 March 2021. 

The now three-month extension until the end of 29^th June 2021, means winding up petitions are prohibited if the statutory demand served was between March 2020 and September 2020.  

Emma Miller, Top Service Company Director said:

“We see the extension of these restrictions as a positive move in that it has given those suppliers the opportunity to see how well a specialised third-party agency can work as an alternative to court action. Suppliers have seen a reduced amount of court fees being paid whilst keeping cash coming into the business. 

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.” 

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

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.