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Insolvency

What are illegal dividends?

Illegal dividends, or unlawful dividends as they are also known, is when there are insufficient retained profits within the company to cover the dividend being paid. The technical definitions of this can be found at Section 830 of the Companies Act 2006 and reads as follows: “A company’s profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.” Dividends vs Salary A director of an owner managed business, where they are the sole director and shareholder, may ask why not just keep things simply and just receive a salary. The popularity of the split between dividends and salary is due to the tax benefits this arrangement achieves:

How assets are sold in insolvency

Pre-pack asset sales can often be viewed suspiciously. The sometimes high profile of these cases then leads to a misconception that assets are just sold back to company directors for rock bottom prices. This is rarely the case and this article will aim to deal with these misconceptions. The breakdown In 2014 Teresa Graham produced her report to Vince Cable into the implications of pre-packed sale in administration to connected parties. Following the “Graham review” pre-pack sales are even more highly regulated and insolvency practitioners are fined and reprimanded for not following the professional standards set out in SIP 16. If a pre-pack sale is made to a connected party the insolvency practitioner must: Demonstrate that the sale represents the highest achievable value for the business. Invite the party to make submissions to […]

Changes to insolvency law: Need to know basis

The final article in this series covers off a number of ways processing of information will occur under the new rules and also acts as a coverall for a few of the miscellaneous provisions which are also of import.   Statement of affairs Along with all of the other statutory forms, there will be a significant change to the information provided in the statement of affairs. It has been identified that as the statement of affairs is an item of public record and is at risk of divulging personal data which some parties would prefer not to be published. Accordingly the new rules state that employee and customer details should be set out in a separate table and this will not be placed on the public record. Instead there will be […]

Changes to insolvency law: Receiver or official receiver

As well as insolvency practitioners in private practice, a number of the new rules also affect the role of the official receiver and the number of insolvency cases they are involved with. Interim receivers It is often the case that only the official receiver will be appointed as interim receiver between the presentation of a bankruptcy petition and the making of a bankruptcy order, rather than an Insolvency Practitioner in most cases. This has changed under the new rules allowing the option of the official receiver or an insolvency practitioner as designated by the applicant. Whether there is a large uptake in creditors seeking to appoint insolvency practitioners into this role will remain to be seen.

Changes to insolvency law: the end of the round table

One of the major changes, particularly with the first meeting of creditors to place companies into liquidation, will be that physical meetings will no longer be an option, unless specifically requested by the required level of creditors. Whilst this may seem like a new advancement, the previous Insolvency Rules have allowed for virtual meetings since 2010 and the team at Robson Scott Associates have been conducting meetings in this fashion since 2011. Our experience is that these meetings are far more efficient and the uptake within the profession has been so low that the law makers have decided to now enforce this. The new decision making and consent procedures are described as follows. Deemed Consent Under the first process notices can be sent […]

Changes to insolvency law: an introduction

From 6 April 2017 the most radical change to insolvency legislation in 30 years will come into effect laying way for huge changes to the way insolvency cases are managed…… or not. Whilst the changes are significant to our view they are 10 years behind the rest of the world and are now only just starting to catch up. This series of blog posts will introduce the new rules and how they will affect you and your clients when considering entering insolvency proceedings. These posts will also take you through the “innovations”, now enforced upon Insolvency firms, which the team behind Business Rescue Expert have already been incorporating into practice for a number of years.
By |February 23rd, 2017|Insolvency|0 Comments

How can I tell If my Company is Insolvent?

One particularly crucial question that a business may need to ask themselves during the most challenging periods, may be “Is my company making money?” At the end of the day, if the company isn’t making money, then it’s failing, and this could lead to a case of insolvency. While determining whether your company is making money can be as easy as checking your end-year management accounts and reviewing your bank accounts, the question of solvency can be a little more complicated to answer. Insolvency, from a professional standpoint, happens when an organization is no longer to meet the financial obligations that have been set in place between it, and its lenders, or lender. Insolvency can lead to insolvency proceedings, in which creditors may take legal action against the insolvent entity in an effort to use some of the remaining assets of the company to pay off mounting debts. Insolvency can […]
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    Will a Company Voluntary Arrangement (CVA) work for my business?

Will a Company Voluntary Arrangement (CVA) work for my business?

While it may be true that many businesses fail during a time of recession of financial turmoil, many of those companies don’t deserve to fail. In a difficult economic climate, businesses can often struggle to prosper and survive, meaning that we often seen businesses go under as a by-product, which would do well in other circumstances. However, there are some solutions available that could prevent the collapse of a potentially profitable company. When a profitable future appears viable for a currently struggling business, and the directors involved with that organisation are willing to continue forwards, something called a “Company Voluntary Arrangement” or CVA, could be an ideal way to protect a group against the legal actions often taken by creditors. The terms of a CVA generally provide a business with lower monthly outgoings, and allow them to take control of their debt, rather than simply giving up and allowing the business to close […]

Liquidation – Some Practical Tips

This is not a guide to liquidation, but a look at some of the important issues that arise during the process that you might need to consider… There are a few guides available that will explain the different types of liquidation along with the liquidation process – indeed on our Business Shut Down page, I explain the liquidation process and options at some length.  The purpose of this blog is not to repeat that information, but to give some practical advice and tips for you to consider alongside the insolvent company liquidation process (also known as Creditors Voluntary Liquidation and CVL). Having decided that the company cannot continue in its current form, your next most important decision is whether the business should just shut down and disappear completely, or whether you should start again? The legal […]

New HMRC cash grab

Under new proposals announced in the Budget 2014 small print, the taxman will be able to access personal and business bank accounts to directly take any arrears of tax you may owe. How will it work? If you, or your business owes more than £1,000 in arrears of tax (inclusive of all forms of personal or business taxation), you could be at risk. Under new proposals due to come into force in April 2015, HMRC will be able to dip into bank accounts. They will not require a court order, nor will they have to issue formal proceedings – as long as they have sent reminders chasing tax arrears. So if you or your business owe more than £1,000 and have been sent correspondence from HMRC, under the new proposals, cash can be taken directly from your bank accounts to settle HMRC debts. HMRC will be required to leave a minimum of […]