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Banks, Lenders & Investors Cash Flow & Forecasting County Court, Legal & Litigation Finance General Rescue, Restructuring & Recovery Turnaround Voluntary Arrangements - CVAs

Insolvent Companies can Survive a Winding-Up Petition

overcome a Winding-Up PetitionIt is possible to get a Winding-Up Petition dismissed even when a business is insolvent and does not have the funds to pay off the creditor(s) who have brought the matter to court.
If a company is insolvent and therefore unable to pay its debts on time, it may still be a viable business with a perfectly good product or service to sell.
A review of the accounts, the cash flow, the processes and scope for restructuring and other initiatives to improve profits will need to be carried out by a turnaround specialist who will also prepare an appropriate turnaround plan.
The turnaround plan forms the basis of demonstrating viability such that it is possible to persuade creditors to accept deferred payments.
The turnaround plan is incorporated into a formal proposal to creditors for a Company Voluntary Arrangement (CVA). In addition to the turnaround plan, a CVA Proposal will include proposals for debt repayment and in some cases for debt write-off.
A CVA is a formal proposal where the process has to be carried out in defined steps to comply with the Insolvency Act and should only be done with the help of a Turnaround or Insolvency Practitioner.  While approval is required from 75% of the creditors who vote, it is arguably in the creditors’ interests to agree such an arrangement as they are more likely to get their money than they would be if the company were Wound-Up.
If pursuing a CVA while a Winding-Up Petition is outstanding, this can be adjourned to allow time for the CVA Proposal to be prepared and the formal process to be followed but any adjournment will leave little time for delay so again specialist help is needed.
Once a CVA is approved the Winding-Up Petition is normally dismissed.
In summary a CVA offers the opportunity for an insolvent company to survive a Winding-Up Petition.
You can find out more about Winding-Up Petitions and CVAs in the free articles that are available online in the ‘K2 Knowledge Bank’ or via App Stores in the ‘Turnaround’ App.

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Business Development & Marketing Cash Flow & Forecasting General Rescue, Restructuring & Recovery Turnaround

January planning – Re:act

React resize 1Now that the business plan has been refreshed, the year’s business goals have been set and the marketing plan to achieve them is ready it is time to put them into practice.
It is crucial that progress is monitored throughout the year, but how this is done will depend not only on the goals but on the nature of the business.
A dash board of key indicators is a useful tool for monitoring progress. It should include financial information such as the bank balance, cash received, amount paid out, outstanding debtors, overdue creditors and stock held.
Other useful information on the dashboard to include might be the value and number of orders and quotes, number of visitors, inquiries or responses by source, whether direct sales, website, email, social media.
For example, those who sell products online might find it helpful to use a dashboard to monitor their weekly sales and cash receipts and check them against those projected in the plan.
Other businesses such as distributors and retailers might monitor their management accounts on a monthly basis but check their stock on a daily basis. Stock sold, new stock and returns.
This is done by having appropriate systems such as bar code scanners which will be covered in a future blog.
The frequency of monitoring will be a matter for each business.
However, if there is a marketing plan it is important to monitor the impact of campaigns and to be open to making adjustments according to their performance and progress towards the goals.
There are two essentials to remember when goals have been set and the actions begun.
First, is to monitor progress regularly.
The second is to be flexible enough to make adjustments if goals are not being met.

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Cash Flow & Forecasting Debt Collection & Credit Management Finance General Rescue, Restructuring & Recovery Turnaround Voluntary Arrangements - CVAs Winding Up Petitions

Surviving a Winding-Up Petition

WindingupPetition helpA Winding-Up Petition need not be the end of a business, but it does require prompt and decisive actions if the business is to survive.
Given that a Petition is usually served when a creditor, be it a supplier or HMRC, has run out of patience, a review of both the financial position and the future prospects is necessary before considering the options for dealing with the Petition. There are several.
When a company’s financial position and cash flow forecasts are dire it is not likely to have the funds to pay off the debt such that financial restructuring is often needed if the business is to be saved.
In addition, the cause of the financial situation is often the business model where an operational reorganisation is also often needed if the business is to survive.
Both the review and implementing change are not something to be undertaken without experience where the help of a turnaround expert is necessary.
Turnaround experts, also called Company Doctors or Restructuring Advisers, will be able to put together a strategy to deal with the immediate need to answer to the court on the required date, will be able to advise on what you are legally obliged to do and will help you to plan a strategy for the future of the business.
There are three main options for dealing with the first hearing of a Winding-Up Petition.
If the business believes that it does not owe the amount stated in the Petition, it can dispute the debt and ask for the petition to be withdrawn and apply to court to stop it being published in the London Gazette.  However, any dispute needs to be credible, and supported by evidence that will be examined as part of the directions (dispute) procedure.
If the review identifies a viable business but the Petition debt cannot be paid before it is heard then a long-term payment plan may be best using a CVA (Company Voluntary Arrangement).  CVAs require consent of a requisite majority of creditors and can also be used to write off a portion of the debt but all too many fail because they are not based on a turnaround plan that is prepared by a suitably experienced adviser.
While there are other options these are covered in the CVA Guide and free articles that are available online in the ‘K2 Knowledge Bank’ or via App Stores in the ‘Turnaround’ App.

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Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

January planning – Re:fresh

RefreshYou’ve done your research and consulted with staff and others and should now have outlined your business goals for the coming year. Now it is time to refresh your business plan.
The big question in this phase is how to achieve your goals.
If your goals are ambitious, achieving them will require additional resources.
New products or services require investment of time and most likely money in R&D, in testing and refining, in design and packaging, in recruiting and training production staff, in plant and machinery, in stock, in marketing literature, in promotion and many more aspects that are key to the success of a new product.
New clients or markets require investment in time and most likely money in market research, in market testing, in advertising and promotion, in sales and marketing, in recruiting and training sales staff, in finding distributors, in learning about foreign markets and many more aspects that are key to establishing new markets.
Once you have a plan, then the plan needs to be resourced. Indeed the availability of resources and finance normally influence the plan. It may be possible to find it with reserves or borrowings but other options should be considered such as partnering with manufacturers, suppliers, distributors or clients who may be prepared to use their own resources for a slice of the benefits. Manufacturers may fund tooling and production and suppliers may fund stock and distribution or both might provide extended credit in return for higher margins. Distributors and clients may pay deposits or prepayments to fund production.
Whatever your plan, an accurate picture of the financial health of the business and projected cash flow will be needed as part of the planning process. Indeed it is often necessary to use the planning process to reorganise aspects of your existing business and restructure its balance sheet.
Having a plan is also necessary to monitor progress throughout the year and provide valuable insights for future goal setting and planning.
Having a refresh stage in the annual planning process will ensure your business remains competitive, even if you do not want to grow. Re:fresh can be used to reinforce a culture of continuous business improvement

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Banks, Lenders & Investors County Court, Legal & Litigation Finance Rescue, Restructuring & Recovery Turnaround Winding Up Petitions

Winding-Up Petitions – the costs of doing nothing

WindingupPetition2 what do I need to doThe following story is a tale of how failing to pay moneys owed can end up not only with costs escalating but can also lead to the risk of a business being closed down as a result of a Winding-Up Petition.
A client was disputing a debt of up to £70,000 in relation to legal costs accrued by their lawyer, because unfortunately the lawyer had not achieved the result the client expected.
After protracted negotiations the lawyers agreed to accept a settlement of £5,000.
However, the client failed to pay because another director of the company refused to pay even this amount.
The lawyer then took the company to court and obtained default judgement for £15,000.
Another 12 months passed, and still the debt was not paid so finally the lawyer issued a Winding-Up Petition in respect of the £15,000 judgement plus interest and costs.
The client had no option but to pay up to avoid their company being closed down. It cost £20,000 excluding our modest fees.
Plainly this whole sorry situation could have been avoided and been considerably less costly had the client paid the £5,000 that had been agreed albeit with only one director.  Instead, doing nothing resulted in having to pay more than four times that amount and to face a cliff-hanger situation regarding its future.
This is a perfect example of how doing nothing can so exasperate creditors to the point where they lose patience altogether.  Do you have any similar examples or anecdotes to share?
For a collection of free articles on Winding-Up petitions and associated issues why not download the “Turnaround” App from your Appstore or visit the Knowledge Bank at K2 Partners.

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Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

January planning – Re:view goals

Blog Reflect Jan 5 2016If you used the first week back in the office to Re:flect on your business and consult with colleagues about your ideas for moving forward, you should have a clearer picture of the potential goals for this year.
The next step in the process is to review the list and consider what might be realistic objectives for the year using “Where” and “When” from Kipling’s Six Honest Men.
“Where”, is about the targets you have identified and it will be useful to look back at the previous year’s business plan and review how successfully the goals you set then were achieved.
In retrospect, if targets were only partially met, or not at all, it may be that they proved too ambitious. If so this is the time to review what obstacles prevented the business from achieving them. Was it something the business failed to do? How much were the results influenced by outside factors beyond your control? It could be that the pricing structure needs to be reviewed. Is further staff training or recruitment needed to enhance the business skill set?
If, on the other hand, the goals were easily achieved it is worth considering whether this year’s targets should be more ambitious.
“When” is about the time frame the business sets for achieving goals. It may be better to set targets that can be carried out by the end of a quarter, by the end of six months, whatever is appropriate for the business and to review progress at each point then adjust actions accordingly.
At the Re:view stage, it is not necessary to define the actual steps and actions that will need to be taken. Getting down to the detail will be the task for the third week of the month in our recommended process for annual planning.
(Image courtesy of pakorn at FreeDigitalPhotos.net)

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Banks, Lenders & Investors Cash Flow & Forecasting County Court, Legal & Litigation Debt Collection & Credit Management Finance General Rescue, Restructuring & Recovery Turnaround

Don’t risk losing your business to a Winding-Up Petition

K2 Blog January 2016 WindingupPetitionWhen a company is on the receiving end of a Winding-Up Petition, it is a sign that a creditor has run out of patience in trying to recover money they believe is owed to them.
The creditor will have weighed up the cost of applying to the courts for a Winding Up Petition which generally involves an investment of ~£3,000 covering £280 in court fees plus £1,350 as a petition deposit (to manage the ‘winding-up’) and the balance in legal fees, so it is a serious step for a creditor to take.
A Petition usually means that the two parties have failed deal with each other satisfactorily whether to take steps to resolve the debt or to be pro-active about dealing with the fact that it can’t be paid.
Winding-Up a company is a formal legal procedure whereby the creditor must be able to prove that the debtor company owes more than £750 as an undisputed debt, it must allow seven days from lodging the application before publishing a formal notice in the London Gazette, also a legal requirement.
However, once the notice is published all the business’ creditors will be aware that there is a problem and since banks are among those that monitor the London Gazette the situation will escalate rapidly since the usual first step for the banks is to freeze the business account.
This makes it harder for a business to carry on trading and in particular to make payments which in turn escalates the problem.
While there are steps a business can take to challenge a Winding-Up Petition, such as disputing the debt, and to restore access to its bank account, such as by applying for a Validation Order, there needs to be documented evidence to show the court.
Ideally, a business should be proactive and deal with the situation early by starting the process of saving the business long before a Petition is served.
Even when a company cannot pay, and when there is a Petition, providing the company is viable it can often be saved.
Saving a business and in particular when there is a Winding-Up Petition needs the impartial advice and the guidance of an expert, whether they are a turnaround advisor or an insolvency practitioner.
However, if things have reached the point where the Petition has been listed for hearing in court, a company can only be represented by a solicitor, barrister or a company director and one of these must attend the hearing to present evidence of steps taken to deal with the situation for there to be any hope of avoiding the court making an Order that the company be compulsorily closed (wound up).
There are more useful free articles on this and related issues to help businesses in difficulties here

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Business Development & Marketing Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

Time for a Fresh Start. Take time to Re:flect

Blog Reflect Jan 5 2016It is all too easy during the first week back in the office to rush into work.
I hope that you have used the Christmas break to reflect on your business and personal priorities and consider what you want to achieve in 2016.
Once you get sucked into the day-to-day minutiae of work, those holiday initiatives quickly get buried rather than turned into plans and implemented.
I recommend using this first week in January as time for a fresh start, time to write down your ideas so your notes can act as a framework for considering them. This process of reflection allows you to consider them in more detail and where necessary gather more information before refining them into goals.
A useful way of thinking about ideas is to use Kipling’s Six Honest Men approach which seeks to answer the questions What and Why, Where, When, How and Who.
They would suggest using this first week to concentrate on ”What?” and “Why”. What are the potential opportunities? What do I want out of my business? Why am I working so hard? What are my/my business’s possible goals?
Over the next four weeks, we will encourage you to adopt a systematic and logical approach to setting achievable goals (what and why) before we identify the actions (where, when how and who) that will be needed to accomplish them.
For example, sounding out colleagues can help you clarify what may have only been a broad outline of an idea. They may also have innovative ideas to contribute as well as more hands-on experience of the practical implications of what is being considered. You might also ask if they are prepared to help you, especially if your ideas involve change.
Summarising the essential points at the end of this period is also crucial before progressing to the next stage which I will cover next week.
There are other benefits from involving colleagues. Consultation can also help to engage and motivate staff, get their buy-in and help them to understand the process so that when it comes time to implementing your plans they won’t be sabotaged.
(Image courtesy of pakorn at FreeDigitalPhotos.net)