Helping Your Company

Options for businesses in trouble – already done
Warning Signs – already done
Trading out – already done

If Insolvent
Thinking about liquidation? – already done but need to amend final paragraph once in WordPress.

Creditors Voluntary Liquidation – already done but need to change ‘meetings’ to decision processes etc once text in WordPress.

Compulsory Liquidation – already done
Directors legal considerations – already done

If Solvent
Solvent liquidation pdf – this needs to be converted to a web page like the others

Background
Following the adoption of the Enterprise Act 2002, Administration has become the gateway to corporate insolvency. When a business needs to be rescued there are often genuine worries about maintaining value – both for existing creditors and for prospective purchasers trying to restart the business. Continuity of supply is usually essential to keeping customers happy; key employees need to be retained; and current contracts need support to avoid potential claims for breach.

Key features

• Once an application to appoint an Administrator is made a moratorium comes into force which stays creditors action against the company.
• An Insolvency Practitioner takes immediate control of the business.
• Trading can be continued whilst a buyer for the business is sought, thereby helping to maximise the return for creditors.
• Supply chain risks can be reduced as the new buyer will not be encumbered with historic debt.
• In certain circumstances, for example the need for business continuity, the practice of ‘pre-packaging’ the administration process may be possible. In a Pre-pack, the sale of the business and assets is negotiated before the company is placed into Administration and the business is sold immediately upon appointment or shortly thereafter.
• The speedy entry process can help reduce the risk to directors of personal liability for wrongful trading.

Unlike Chapter 11 in the US, the Enterprise Act did not provide for super priority funding to enable the Administrator to raise funds for continuing trading while restructuring is planned and implemented. There is also an extensive list of other aspects to be considered: priority expenses during the administration, such as rent and rates; adoption of employee contracts; retention of title clauses on stock; the risk of trading losses; and the prospect of expensive marketing and lengthy – often contentious – sales processes. These factors have resulted in Pre-packs gaining increasing favour among turnaround specialists, directors and banks which, even with security and personal guarantees, still have capital at risk.

Company Voluntary Arrangement – already done but need to change ‘meetings’ to decision processes etc

Law of Property Act Receiver – already done

Time to Pay Arrangements
In many businesses, especially the service sector, tax is by far the largest ongoing liability. If your company has had unexpected fluctuations in profitability, you can find yourself with a large tax liability and no cash. HMRC have set up a unit which deals with the payment of tax by instalment, which is called a Time to Pay (TTP) Arrangement. This scheme is suitable for companies that have short-term cash flow difficulties as opposed to more structural problems where a restructuring process involving more than just HMRC debts is needed.

A time to pay scheme is an arrangement with HMRC to pay tax over an agreed period. All taxes can be subject to TTP, including PAYE, VAT, Corporation Tax or Self Assessment liabilities. The scheme can be accessed by calling the HMRC Business Payment Support Service on 0300 200 3835 or the Self Assessment Payment Helpline on 0300 200 3822.

Before picking up the phone, consideration needs to be given to the company’s overall position as well as its history of dealing with HMRC. Have all returns been filed on time? Has the business history of defaulting on payment deadlines? And most important of all, has the business defaulted on an earlier TTP arrangement?

HMRC will need persuading that they should allow a taxpayer additional time as opposed to passing the file over to their enforcement team. To help present a good case, you need to prepare. Common questions include:

• Why are funds not available?
• When did you first realise HMRC could not be paid?
• Has a cashflow forecast been prepared showing that the business is viable?
• Will future tax liabilities be paid in full and on time?
• What is the shortest time that HMRC can be repaid without causing strain on the viability of the business and payments to other suppliers?

If you would like help with dealing with HMRC you can contact us for a no obligation consultation on 0845 686 0100 or by making contact with one of our team.