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07833 240747

What Does Going Into Administration Mean?

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Administration followed by a CVA

in What Does Going Into Administration Mean? What is a CVA (Company Voluntary Arrangement)?

Administration followed by a Company Voluntary Arrangement What would be the purpose of using an administrator to propose a CVA? The answer is control over aggressive creditor actions, protection from landlord actions and a moratorium to prevent future legal actions before a CVA can be proposed. Given that it can take several weeks to build a viable CVA proposal sometimes creditors may already have started legal actions such as issuing a winding up petition or enforcement action.So, it may be necessary to put the company into administration to protect it whilst the detailed forecasts and CVA proposals are prepared and to discuss the scheme with the bank and other critical creditors. Once a viable CVA scheme is ready it becomes the administrators CVA proposals not the directors. So, in effect, the CVA can be used as a method of exiting an administration.The main reason your business might want to exit an administration is for reasons of cost and control. An administration is a powerful but expensive insolvency procedure. Powerful in that it can allow the business to trade and be sold if possible in a very short time scale if necessary. Expensive though, because the administrator has to run the company in place of the directors and has complete control of all the monies in and out of the business. They will also look at how to restructure the finances and one possible option is a CVA.If a buyer cannot be found but the business is viable and it will maximize the interest of creditors then a CVA is an acceptable exit strategy. The CVA will hand back the business to the directors and the insolvency practitioner and his / her team will continue to monitor the CVA as supervisors.So how does it work?The IP, once appointed by the board, will put together an administration proposal and get external asset valuations and statement of affairs drawn up. After getting floating charge holders consent, the IP will make an application to the court stating the purpose of the administration. The company enters administration and all legal actions are stayed by the moratorium in place. The IP then calls a creditors meeting to report on his proposals for the administration and then they will prepare the CVA. The CVA will then be published to creditors (a minimum of) 14 days before a meeting is scheduled to vote on the proposal. If the CVA is approved by creditors the CVA starts. 28 days later the IP applies to the court to end the administration and usually becomes the supervisor.The directors then get on with running the company under a CVA. Of course, they can exit a CVA early as well if they want. We have had a number of our clients do exactly that.

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Administration followed by a CVA

Oasis and Warehouse likely to go into administration

in A guide for redundant employees in administration or insolvency situations News What Does Going Into Administration Mean?

17/06/2020Almost two months after Hilco Capital secured a deal to buy the Oasis and Warehouse brands, saving it from administration, we hear that the Oasis and Warehouse online businesses and their associated intellectual property would be bought by Boohoo.Boohoo has a market value of almost £4.7bn. Its portfolio of brands now moves to 9. Just last month it struck a deal to buy the minority interests in women's fashion retailer, PrettyLitttleThing.30/04/2020Today we hear that Hilco Capital, the former owner of HMV, has agreed a deal with administrators regarding high street fashion chains, Oasis and Warehouse.Hilco has agreed to buy both brands, along with Idle Man and the stock from their many outlets across the UK. So, the intellectual property assets and some stock has been sold.However, Oasis and Warehouse Group's stores are not included in the deal, meaning immediate redundancy is the case for over 1,800 staff. The staff have been told no statutory redundancy pay will be received.Since, April 22 the retailers stopped trading online because of the “rising costs of fulfilling online orders and associated logistical challenges, after appointing Deloitte as administrator the previous week.''Joint administrator of Deloitte, Rob Harding explained the sadness of having to said:  “It is with great sadness that we have to announce a sale of the business has not been possible and that we are announcing so many redundancies today. This is a very difficult time for the Group’s employees and other key stakeholders and we will do everything we can to support them through this.”15/04/2020Addressing the rumours from yesterday, it is now confirmed that high street fashion chains, Oasis and Warehouse have fallen into administration. Deloitte are the appointed administrator.92 stores and 437 concessions are affected, all these being in UK. 200 jobs have been lost with immediate effect. Around 1,800 staff, including those on the shop floor, in concessions and those at head office, will be furloughed.The brands will continue to be sold online, whilst the administrators work on finding a buyer.Chief Executive of Oasis and Warehouse, Hash Ladha explained the situation as unpredictable, shocking and difficult for all.Joint Administrator at Deloitte, Rob Harding said how the retail industry as a whole was suffering devastating effects from coronavirus."Despite management's best efforts over recent weeks, and significant interest from potential buyers, it has not been possible to save the business in its current form."It is thought that there will be interest from bidders in buying the businesses but of course with the current economic situation, it is all very uncertain.14/04/2020Oasis and Warehouse look likely to be the next casualties of the coronavirus crisis.  Sky News has reported that they are about to file an intention to appoint administrators at Deloitte, with an announcement expected later on Tuesday or Wednesday.Three weeks ago The Oasis and Warehouse Group, which is owned by the failed Icelandic lender Kaupthing, was approached for a possible sale from an unnamed buyer.  Kaupthing has managed to offload some of its brands already such as Karen Millen and Coast to Boohoo.Although there is understood to have been strong interest in a deal, the uncertainty caused by the coronavirus pandemic is thought to have made a solvent sale impossible to conclude.Both retailers support approximately 2300 jobs.The difficulty facing many retailers is stark. The High Street has already been under pressure and the creditworthiness of these companies has made them unlikely to be able to draw on the government help with respect to loans.  Yes, they can benefit from the furlough arrangement and the business rates but with high rents and creaking balance sheets it is likely that many won't be able to make it through this crisis.

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Oasis and Warehouse likely to go into administration

Advice if you supply a business that has gone into administration

in What Does Going Into Administration Mean?

We are a supplier to a company that has gone into administration, What should we do? How can you avoid getting stuck?Firstly, you need to get to know your industry. There are often tell tale signs that a business is in difficulty apart from just starting to pay late. Please see our list of warning signs of a business that is in distress. Of course, these are from the company in difficulty point of view but it should give you useful pointers. So be ahead of the news. Make sure that you know all the excuses about slow or non payment - the aim is to get paid and keep your own cash flow going. But what if the debtor has gone into administration. You need to know the law and your rights as a supplier. You have a contract with ABC LTD and on 21st December 2019, ABC LTD goes into administration, You are owed all monies up until 21st May. However of course you may not receive much of it. You must be able to provide proof of debt so make sure you have invoices to hand. The administrator should contact all creditors to inform them of the administration and inform them of a creditors meeting. Make sure you attend the meeting if you can, or get someone to attend for you. Do not supply or give credit to ABC LTD, if you continue to supply credit to this company there is a good chance you wont get paid because that company on paper does not trade anymore. Speak to the management (if a new management company has been set up), the administrators, your contacts. You need to be sure you are happy to continue to trade with the new business (out of administration) . You will need to agree new terms ie, reduced credit, a DD mandate, payment up front, (pro forma) whatever you are comfortable with and you will need to get the name of the new company. In a pre-pack sale where the business is put into administration and immediately sold, it may of course be trading under a different but similar name the very next day such as ABC Ltd. This is what is called a trading administration prior to a sale. If you are asked to supply the administrator (who is running the business) ask for payment up front or a guarantee from the ADMINISTRATOR that your business will be paid. Set up a new agreement but be careful who signs it, it can be signed by the following peoplea) ABC (IN ADMINISTRATION) LTD, co-signed by the administratorsb) The administrators themselvesc) The new management company, appointed by the administrators.The debt owed to you by ABC (IN ADMINISTRATION) LTD and ABC LTD are two separate things. The main purpose of administration is to rescue the company so it is often important that all suppliers continue to supply for the good of everyone. What if the business is sold via a pre-pack to a newco and that company with the same management asks your company to supply it? If the business is sold then this could be an opportunity to supply a new and perhaps more lucrative customer! but again make sure that you get the best terms possible. Pro forma is usually the best way to supply until there is a track record of being paid. Then provide say 7 days credit over time. Once again make sure a tight rein is kept on the credit.If the administration of a large customer puts you under pressure then there is no harm in giving us a call and we will give you free no obligation advice over the phone.

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Advice if you supply a business that has gone into administration

Betterware goes into administration soon after Kleeneze

in A guide for redundant employees in administration or insolvency situations News Retail What Does Going Into Administration Mean?

Betterware, which sells household items via a catalogue sent to millions of homes, has gone into administration following its sister company Kleeneze.  Betterware employed directly 90 people and thousands of door-to-door selling roles.Betterware said that difficult trading conditions and cashflow problems had been responsible for its demise.The firm started in 1928 when it was founded in east London as a door-to-door seller of brushes and polishes. The catalogue was launched in the 1970s and in 2015 the business was bought by JRJR, a Texas-based consumer sales group.The company relies on thousands of self-employed agents who distribute the catalogue around the country. Many of them have other forms of income to supplement their earnings.Begbies Traynor, the company’s administrator, said that Betterware had ceased trading, with all staff made redundant. “Our aim was, of course, to find a purchaser for the business as a going concern in order to safeguard the jobs, but unfortunately this did not prove possible,” it said.Any parties interested in acquiring assets of the company has been asked to contact the joint administrators Gareth Rusling and Claire Dowson of Begbies Traynor as soon as possible.No details have been given to those who may have ordered goods but have a look at our page on “will I get my goods!”This is what one of the regional managers sent to us to put her side of the story

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Betterware goes into administration soon after Kleeneze

Administration Flow Chart

in What Does Going Into Administration Mean?

See here some unique Administration flowcharts for your free use! They explain in English what happens in an Administration process where a pre-pack is used or where CVA follows.administration-followed-by-cvaAdmin Pre Pack Flowchart - PDFSo would you now like to know why Admin pre-pack selling the business to directors is favoured by Insolvency Practitioners BUT, not necessarily by the clearing banks? Call Keith Steven on 07833 240747 to find out more and how a CVA can achieve huge change while leaving YOU in control!

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Administration Flow Chart

iCandy goes into administration due to cash flow problems

in A guide for redundant employees in administration or insolvency situations News What Does Going Into Administration Mean?

iCandy has gone into administration due to cash flow issues that have persisted since the start of 2017.The company was founded by Clinton Lewin in 2012 after his previous company – Clinton Cards – went into administration in the same year. Why has iCandy gone into administration? Administrators FRP have cited two primary reasons for iCandy falling into administration; a reduction in consumer spending and a drastic increase in business rates. In combination, these factors prevented the company from generating sufficient cash flow to continue operations as they had done previously.Supported by Lewin's personal savings, iCandy opened a total of 14 stores between being founded in 2012 and 2016. This was facilitated by a lengthy period of strong overall revenue growth, evident from the revenues of £4.3m for the year ending July 2016. However, the aforementioned pressures caused growth to slow to unsustainable levels in the period between then and the start of 2017.In terms of customer numbers, administrators blamed increasing fuel and food prices. Customer spending was especially low in many of iCandy's smaller branches. These circumstances led Lewin to call in the administrators with a view to finding a more sustainable long-term solution. What will the administrators do? FRP Advisory, led by partners Glyn Mummery and Jeremy French, have been appointed as administrators. While iCandy and its assets are up for sale, the administrators have outlined their intention to keep 10 stores open for trading. These stores currently employ a total of 79 full and part-time employees. However, four stores across Hertfordshire, Suffolk and Essex will be closed, with 22 staff set to be made redundant.On 9 May, Mummery stated: "Many of the stores continue to trade well from desirable locations in the more thriving market towns of Essex, Hertfordshire and Suffolk, and they continue to capture the purses of shoppers looking to spend within the wider gifts market."FRP claim to have already communicated with a number of parties that have shown potential interest in a buy-out. Total unsecured liabilities are thought to be in the region of £2m.The question really is would a CVA have been a better option?  A CVA could have allowed the unprofitable stores to be closed down and given the company breathing space to restructure.  Of course, it does depend on the support of the creditors at 75% by value and there may have been an immediate threat in the form of a winding up petition.  But it is worth remembering that many business can be saved by the CVA mechanism.

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iCandy goes into administration due to cash flow problems

Another customer safe from administration and in a CVA

in What Does Going Into Administration Mean? What is a CVA (Company Voluntary Arrangement)?

A recent customer admitted other potential advisors were pushing for them to go into a pre pack administration, but with KSA's help, this business is in a CVA and will continue trading and returning money to creditors, including paying back a proportion of their £500k of tax liabilities to HMRC.We were sent the following email:All, I just wanted to thank you all for your assistance with the CVA preparation. With 100% of creditors voting in favour this is a testament to your experience and process in putting these together. The last few weeks has been a nerve wracking time and timing has been close to the wire, but the end result means that we are now well positioned to execute our plans going forward to the benefit of all. In deciding to go with KSA we had numerous other providers who were either cheaper or pushing a pre-pack route. You have delivered what you set out and certainly a much better outcome than administration. Marie, a special thanks for your efficient and calm handling of all the issues that have arisen, and Andrew – your “mother of all spreadsheets” will now double as our operating budget for next year. Finally, if you ever have any prospective clients who require a reference, I would be happy to talk with them. Regards

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Another customer safe from administration and in a CVA