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Banks, Lenders & Investors Cash Flow & Forecasting Finance Rescue, Restructuring & Recovery Voluntary Arrangements - CVAs

Lenders are jeopardising businesses with their short-term thinking

It is often argued that banks’ and lenders’ impatience gets in the way of attempts to restructure and turn around businesses that might otherwise have a chance of survival.
This short-term thinking means that they are wary about agreeing to the use of Company Voluntary Arrangements (CVAs) to allow for the survival of insolvent businesses in a way that will benefit them as well as other stakeholders.
lenders short term thinkingClearly, banks and some creditors are dubious about the merits of CVAs, as in the current case of UK Toys R Us, whose creditors are due to vote on a proposed CVA this coming Thursday, December 21. If approved 26 stores will be closed and up to 800 employees made redundant. The rest of the business, however, will be saved and all creditors will be better off.
The Toys R Us situation is complex, and questions are being asked about the state of its pension fund, in particular by the Government’s Pensions Protection Fund (PPF) who are threatening to reject it, unless the company pays £9 million into the company pension fund. This might raise questions about preference, but I am sure the lawyers will deal with that. There are also questions about the tripling the remuneration for 2014 to 2016 for its former boss and an alleged waiver of loans to a company in the British Virgin Islands.
The other side of the argument is that CVAs allow businesses to implement plans for restructuring their finances and reorganising their operations to become viable without pressure from creditors. In turn CVAs result in fewer business collapsing and the preservation of more jobs.
This was the argument put by both the EU and the UK in 2016 in proposing the introduction of a three-month moratorium to allow insolvent companies to put together plans for restructuring as part of a review of current insolvency arrangements.
A similar argument was put earlier this month by Harold Tillman, former British Fashion Council chairman, when he called for US Chapter 11-style laws to give companies some breathing space.
The question is, would such protection result in both struggling and Zombie companies being restructured in a way that will benefit the economy?

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Cash Flow & Forecasting Finance General Rescue, Restructuring & Recovery Turnaround

Stressed? Doing nothing is not an option

K2 Blog December 10 2015 OstrichDepending on personality type, people react differently to stress and the feeling it brings of being overwhelmed.
However, being frozen with fear when a business is in difficulties is really not an option if its owners want the business to survive.
According to Jeff Bezos, founder of Amazon: “Stress comes from not taking action over something that you can have some control over.”
But often in a particularly fraught situation, when it feels like there is no time to think, it is difficult to recognise the signs of stress so the first step is to recognise the symptoms. The physical symptoms may be a stiffening of the neck, sweaty palms, lethargy, displacement behaviour or the stomach clenching. The other symptoms include inertia, fear, anxiety, worry, feeling out of control, avoidance, inability to make decisions, catastrophising to see the worst possible outcome, or simply doing trivial things to take the mind off the problem.
Once you have recognised the signs you can start to address the causes.  Part of this is to analyse the situation and to break it down into manageable chunks. The other part is to research the causes and get help.
It may help to rethink your attitude to the situation so that you see it as one where there is an opportunity to move forward.
That will lead to breaking down possible actions into small steps, such as making that phone call to HMRC, if the business is having problems paying bills on time, or sending an email or calling a late-paying customer.
It also means identifying those things in the situation that you cannot deal with alone and accepting that there is a need for expert help, or even just talking to someone trustworthy who can provide a different perspective.
Breaking a difficult situation into manageable tasks is a great stress reliever.
Doing nothing is not an option.

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Banks, Lenders & Investors Business Development & Marketing Cash Flow & Forecasting Finance General Insolvency Rescue, Restructuring & Recovery Turnaround

Don’t let fear rule your business behaviour

A researcher in the USA asked small business owners what they most feared or worried about and we would argue that the findings would be the same or similar in the UK.
Top concerns were fear of failure, no customers, poor sales, wasting money on ineffective marketing, financial failure and negative effects on their personal lives.
Some would argue that a certain amount of fear can be a great motivator to keep the adrenaline flowing as human beings thrive on challenge.
However, too much fear can be overwhelming and paralysing, resulting in an inability to make decisions, let alone take risks. Decision making is a fundamental necessity in business, as is facing up to problems if the business is in difficulty. Especially critical are when problems involve cash flow, creditor pressure and litigation that might lead to insolvency.
Regardless of whether we are motivated or paralysed by challenges the worst path to take is to keep our thoughts to ourselves or to ignore a situation.
It is always helpful to share ideas and problems, whether a small business is planning for growth or needs to make changes if survival is in jeopardy.
A business advisor, experienced colleague or friend is likely not only to be on your side but also able to take a dispassionate view and may well produce ideas or solutions you haven’t thought of. Certainly the act of expressing what is on your mind will help you to clarify an issue and may also reduce the stress to manageable proportions where paralysis gives way to effective action.

Categories
General HR, Redundancy & Trade Unions Rescue, Restructuring & Recovery Turnaround

Will the new Employment Tribunal fees give employers some protection?

On the face of it the new charges on employees seeking redress for workplace issues via tribunals could be good news for employers, particularly SMEs.
In theory, as the FSB has pointed out, the £160-£250 to lodge a claim and the £230 or £950 fee if the case goes ahead ought to deter weak or frivolous claims that businesses have hitherto felt obliged to settle without contesting for fear of huge legal bills.
A client of mine recently had a male employee who, after a couple of warnings, was then made redundant. Despite ample evidence that he had had several recent girlfriends he then took the company to tribunal, encouraged by a solicitor’s no win no fee deal, for unfair dismissal on grounds of his sexual orientation as a gay man! The company settled out of court for £7000 for fear of high legal costs if they contested in court.
When turning around companies I believe in working with the unions or employee representatives when reorganising staff or redundancy. Indeed K2 now has a former union official who as our ‘Employee Liaison Officer’ specialises in managing the process. Equally, it is important that employers follow all the correct procedures when using redundancy.
However, there are some caveats about how effective a deterrent to weak claims the new payments will be.  Firstly, Unison has been granted permission for a judicial review on the introduction of fees. Secondly, costs can be reduced where there are multiple claims of two or more people against the same employer. Similarly fees can be significantly reduced or waived where a claimant cannot pay.  Thirdly will the new fees deter the “ambulance chaser” lawyers offering no win no fee deals?
In our view the jury is still out on whether this new ruling will make life easier for employers. What do others think?