Tag: Insolvency

Restrictions on winding up petitions, which raised the debt threshold to £10,000 or more and required creditors to give debtor businesses 21 days to respond to alternative proposals before seeking a winding up order have now been lifted.

The measures were introduced in October 2021, replacing previous temporary changes that had been in place since early in the pandemic.

When announcing the measures, the Insolvency Service stated they would “be in force until 31^st March 2022″, but many temporary arrangements put in place to respond to the impact of Covid were extended beyond their original end dates. In this case, it seems the government has decided circumstances are close enough to ‘normality’ again to end the restrictions as planned.

It is difficult to tell what effect the changes will have on insolvencies. While the debt threshold was raised significantly from £750 to £10,000, it only applied to single debts, meaning the threshold could still be reached through the sum of multiple debts owed to one creditor or of debts owed to a group of creditors. The restriction still offered added protection to many businesses, of course, especially smaller companies which were more likely to have been impacted by Covid.

Whatever the impact on the insolvency market, the changes are the latest indication from the government that it is returning to ‘business as usual’.

In a related announcement, Business Minister Paul Scully confirmed that the general moratorium on commercial evictions has ended and “a new law is now in place to help resolve certain remianing commerical rent debts accrued because of the pandemic”.

The Commercial Rent (Coronavirus) Act 2022 makes available a legally binding arbitration process to commercial landlords and tenants who have not reached an agreement. The law applies to businesses forced to close, or whose activities were heavily restricted, as part of the government’s Covid restrictions. It protects eligible firms from eviction for a further six months.

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If you’re looking for an experienced company to reliably serve documents, including winding up peititions, look no further than ESA Risk. Our extensive network of process servers covers the whole of the UK (as well as overseas locations).

Need to confirm an address before sending documents? We also provide tracing services, ensuring you serve the right people in the right place at the right time.

Email us at process.serving@esarisk.com, or call us on +44 (0)343 515 8686.

Update: the UK government published the outcome of the consultation on 12^th September 2023. Read The future of insolvency regulation – government publishes consultation outcome.

The proposals include creating a single regulator for insolvency practitioners and extending regulation to companies that offer insolvency services.

Currently, the country’s 1,500 or so insolvency practitioners are regulated as individuals – an arrangement that the government believes “has not kept pace with changes in the way the insolvency market operates”. Many firms employing insolvency practitioners and offering insolvency services are not governed by qualified insolvency practitioners, but the firms themselves are not covered by regulation, at present.

The proposed new regulator would be part of the Insolvency Service and would replace the role of the four recognised professional bodies that currently cover insolvency practitioners: (largest to smallest by number of members)

• Institute of Chartered Accountants in England and Wales (ICAEW)
• Insolvency Practitioners Association (IPA)
• Institute of Chartered Accountants of Scotland (ICAS)
• Chartered Accountants Ireland (CAI).

The government views the current regime of regulation as “disproportionately complex” considering the relatively small number of qualified insolvency practitioners.

Under the changes, individuals and companies offering insolvency services would be subject to an annual assessment to demonstrate they meet the minimum requirements for registration.

Other key changes included in the consultation are the creation of a public register of all firms and individuals that offer insolvency services and the creation of a system of compensation and redress in the event of insolvency cases being mishandled.

Opening the consultation, Business Minister Lord Callanan said: “Those most impacted by insolvency need confidence in the professionals involved, and the UK regime has a strong reputation for delivering the best outcomes possible when an insolvency occurs. In order to maintain that confidence, the regulatory regime must keep pace with the times and these proposals to introduce an independent regulator will strengthen the regime and deliver greater transparency, accountability and protection for creditors, investors and consumers.”

The consultation – which runs until 25^th March 2022 – invites views from within the insolvency industry (from insolvency practitioners, professional and trade bodies, and related professionals such as lawyers, etc.), but also from any other interest parties (including debt charities, business representative organisations and members of the public).

The proposals are based on the results of a 2019 Call for Evidence and would apply to England, Scotland and Wales.

The suggestion from the Insolvency Service’s 5-year strategy, published in September 2021, is that implementation wouldn’t start until 2024.

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Insolvency investigations

When you suspect fraud or believe that a company director or third party is not being honest, we understand how difficult and time-consuming the investigations process can be. Our investigative services are designed to provide you with the whole picture allowing you to concentrate on the more technical insolvency issues. From intelligence gathering and tracing, to on-site support including digital data capture and forensics, ESA Risk has the investigations side of your insolvency case covered.

Support for company owners and directors

If you have a limited company that you wish to close, we can introduce you to an insolvency practitioner, who will ensure the correct legal process is followed.

If you suspect that a fraud has occurred within your business and need advice or support on the next steps, we’re here to help.

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Contact Mike Wright, Risk Management & Investigations Consultant, at mike.wright@esarisk.com, on +44 (0)343 515 8686 or via our contact form, to find out more.

 

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The UK government has announced the addition of “new powers to tackle unfit directors who dissolve companies to avoid paying their liabilities.”

The change allows the Insolvency Service to investigate the potential misuse of the company dissolution process and to disqualify directors who are found to have abused the system.

The legislation – introduced under the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Act – appears to be a direct response to the forecasted issues around the repayment of government-backed loans made available during the Covid-19 pandemic. The Act will “help tackle directors dissolving companies to avoid repaying” those loans.

Whereas previously, the Insolvency Service had the power to investigate company directors in cases of insolvency and (on the evidence of wrongdoing) active companies, these new powers will now “extend those investigatory powers to directors of dissolved companies”.

If misconduct is found, directors can face a range of sanctions, including:

• Disqualification from holding a directorship for up to 15 years.
• Prosecution (“in the most serious of cases”).
• An order to compensate creditors who were left out of pocket due to fraudulent practice.

Announcing the changes, Business Secretary Kwasi Kwarteng said: “These new powers will curb those rogue directors who seek to avoid paying back their debts, including government loans provided to support businesses and save jobs. Government is committed to tackle those who seek to leave the British taxpayer out of pocket by abusing the covid financial support that has been so vital to businesses.”

The Act received Royal Assent of 15^th December 2021 and will apply to England, Scotland, Wales and Northern Ireland.

Get support from ESA Risk

If you have a limited company that you wish to close, we can introduce you to an insolvency practitioner, who will ensure the correct legal process is followed.

If you suspect that a fraud has occurred within your business and need advice or support on the next steps, we’re here to help.

Contact Mike Wright, Risk Management & Investigations Consultant, at mike.wright@esarisk.com, on +44 (0)343 515 8686 or via our contact form, to find out more.

Cristina Angelica Tasca, from Arbroath, has been banned “from directly or indirectly becoming involved in the promotion, formation or management of a company without the permission of the court” after failing to produce company accounts or records during the liquidation of her Angel Tas Limited construction business.

The 27-year-old was unable to explain more than £716,000 of expenditure, which included £16,000 of cash withdrawals from her company’s bank account, according to a press release from the Insolvency Service.

Liquidators were called in following a winding-up petition from the UK’s tax authorities, after Ms Tasca failed to make obligitary tax payments from 2019 and further failed “to respond to repeated requests for payment”. The liquidators made “numerous requests” to see Angel Tas Limited’s company accounts and records, but Ms Tasca was unable to provide either. As a result, it was impossible to identify the purpose of expenses totalling over £716,000. In addition, liquidators could not “confirm whether the receipts of nearly £700,000 were a true representation of all the company’s sales”.

Ms Tasca’s case was heard in Forfar Sheriff Court on 7th July 2021, following an investigation by the Insolvency Service. The hearing led to the construction boss – whose company specialised in plastering and rendering – being disqualified for 7 years, effective from 27th July 2021.

Such cases act as a stark reminder of the duty of directors, and a warning of the consequences when duties are not upheld. “All directors have a duty to ensure their companies maintain proper accounting records”, commented the Insolvency Service’s Chief Investigator, Rob Clarke, in relation to Ms Tasca’s disqualification. “This includes delivering them to the office-holder in the event of an insolvency.” He referred to the director’s lack of record keeping as a potential “cloak for impropriety”.

A disqualification order is strict and wide-ranging. As well as placing a ban on holding a directorship, disqualification “stops you acting as if you were a director”. The order cannot be avoided through a change of job title/description, nor by instructing other people in the running of a company. In Ms Tasca’s case, her company was incorporated in Scotland, but her disqualification applies across the UK and to businesses with a “sufficient connection” to the UK.

Do you need support with your company accounts?

If you need advice about or support with your company’s accounts and records, ESA Risk can help. Our Consulting and Risk Management teams include experienced chartered accountants, business managers and advisors. ESA Risk consultant Kevin Bennett has held in-house and consultancy positions in a wide range of industries. He specialises in all matters of accounting, including book-keeping and corporation and personal tax returns. Contact Kevin today for the advice and support you need.

The Insolvency Service has signalled the end of temporary insolvency restrictions in England, Scotland and Wales from Friday 1^st October 2021. (Northern Ireland will follow with “similar legislation”). However, some protections for businesses facing insolvency will remain until at least 31^st March 2022, with new “targeted measures to support small business and commercial tenants” due to be introduced from next month.

Business Minister Lord Callanan believes “the time is right to lift the insolvency restrictions that were needed during the pandemic”, as “we are seeing life and the economy returning to normal with a strong rebound”.

What are the new insolvency restrictions?

Under the new legislation, winding up petitions will only be issued for debts of £10,000 or more – a significant increase on the £750 debt threshold pre-pandemic. However, this higher figure may be deceiving, as the £10,000 threshold doesn’t need to apply to a single debt, but can be the sum of multiple debts owed to 1 creditor or of debts owed to a group of creditors.

The second measure to be introduced will give debtor businesses 21 days to submit a payment proposal to creditors before the creditors can take winding up action.

In addition, the 16^th June announcement that commercial tenants will be protected from eviction until the end of March next year is being upheld. The Insolvency Service notes that “businesses should pay contractual rents where they are able to do so.” The extended protection is designed to stop commercial landlords from liquidation of limited companies to repay “arrears built up during the pandemic”.

The Insolvency Service expects these new measures “will particularly benefit high streets, and the hospitality and leisure sectors”.

Which insolvency restrictions are ending?

The measures which are ending include the suspension of serving statutory demands and wider-ranging restrictions on winding up petitions. The suspension of the wrongful trading rules, which temporarily removed the threat of personal liability from directors for wrongful trading, was lifted at the start of July 2021. All 3 of these temporary measures were put in place in June 2020, with the restrictions on statutory demands and winding up petitions applying to the period 1^st March 2020 to 30^th September 2021, as part of the Corporate Insolvency and Governance Act 2020.

The Act introduced some permanent measures, too, which will remain in place beyond the end of the month. These permanent measures centred on rescue and restructuring plans, and were in development before the Covid-19 pandemic.

What will be the impact of the changes?

On balance, October’s changes appear to benefit creditors, while affording some level of continued protection to the most vulnerable debtors – SMEs, high street business and those in the hospitality sector. How strong those protections are in practice remains to be seen, however, as the new £10,000 debt threshold for winding up petitions may not be high enough if creditors decide to group together to take action.

Instruct ESA Risk today

If you’re looking for an experienced company to reliably serve documents, look no further than ESA Risk. Our extensive network of process servers covers the whole of the UK (as well as overseas locations).

Whether you require us to serve relatively straightforward, standard documents or to organise complex time-synchronised, multi-location services, either in the UK or overseas, we’ll work with you to understand your specific requirements and tailor our services and fees accordingly.

Need to confirm an address before sending documents? We also provide tracing services, ensuring you serve the right people in the right place at the right time.

Email us at process.serving@esarisk.com, or call us on +44 (0)343 515 8686.