Written ByKeith Steven
Managing Director
Keith is the Managing Director of KSA Group Insolvency Practitioners which has been established for 25 years. The company has undertaken more CVA led rescues than any other firm. Read our case studies to see how.
We are a firm of very worried solicitors. Our legal practice is a partnership. We are under growing pressure from all sides. How can you help us solve these problems, restructure and survive?
If you are practising as a partnership you are of course jointly and severally liable for the business and personal debts you have built up. What should you do if the practice is struggling?
First thing to do is to establish if you are insolvent. See the 3 tests below:
Simply – can your practice pay its debts as and when they fall due for payment? Are you as an individual partner in cashflow difficulties with aggressive creditors? This too may cause problems for the partnership.
For example if you are not paying the deductions from employees for NIC and Income Tax across to the HMRC on the 19th of the month following the month they were deducted, then your partnership may be insolvent. Have you met loan repayment dates for practice loans or bank loans?
If your trade creditors sell to you on say 30 days terms and you regularly pay on 90+ days, then you may be insolvent.
Simply, does your partnership owe more than it owns, or are your business assets exceeded by your business liabilities? If yes, then you are insolvent.
It is important to point out that this test should include contingent or prospective liabilities. (If you need advice on these issues email us).
If a creditor has obtained a County Court Judgment, this may demonstrate your partnerships insolvency and the creditor may petition to wind up the partnership.
If a creditor has obtained a statutory demand for greater than £750 and it remains unpaid for more than 21 days, then the creditor may petition to wind up the partnership.
Second thing to do is to use our free daily cashflow spreadsheet (EASY TO USE) and set out the expected cashflow in and out of the business over the next few months.
If you need any advice on filling this out we will provide this free of charge. Please call us on 0800 9700539
This tool will set out what the likely cash position is in the business over the next few months and will help YOU decide which is the most appropriate option. If cash is drying up and there is no way to fix it then winding up the partnership and possible personal bankruptcy could be the option to study see Plan C below.
If cash is tight but still flowing then Plan A or B should be considered. If you know that good cashflow is coming through in the next few months then Plan A can be a powerful way to buy that time.
Plan A trading out and refinancing (avoid insolvency)
Plan B Partnership Voluntary Arrangement (PVA) and or linked individual voluntary arrangement
Poundland in CVA rumours
Sky News has reported that Polish-based Pepco Group, which has controlled Poundland since 2016, has recruited AlixPartners, the retail experts, to handle a sales dip that has prompted worries about company's future. The company operates over 850 sites and employs 18,000 staffLike for like sales were down 7.3% over the crucial Christmas period.AlixPartners is understood to have been formally engaged last week, with options including a company voluntary arrangement (CVA) or restructuring plan said to have been discussed by a range of advisers on a highly preliminary basis.In its trading statement, Pepco said that Poundland had suffered "a more difficult sales environment and consumer backdrop in the UK, alongside margin pressure and an increasingly higher operating cost environment"."We expect that the toughest comparative quarter for Poundland is now behind us - the same quarter last year represented a period prior to the changes made within our clothing and GM [general merchandise] ranges - and therefore, we expect the negative sales performance for Poundland to moderate as we move through the year."The company is said to be looking at multiple ways to improve its cash position by selling more goods over £1 to expand its range of products.The mere fact that it has been leaked that a company voluntary arrangement (CVA) has been discussed is pertinent. The reason is because talk of a CVA can be a very useful tool to put pressure on landlords to consider rent reductions. Under a CVA the retailer can exit leases, at no cost, leaving landlords out of pocket. To understand a bit more about this please read our CVA and retailers article.Of course it is also likely that the company will come under extra pressure from the increases in minimum wage, NI increases and the loss of 75% business rates relief.Since the cost of living crisis there has been strong competition from other discounters like B&M and Poundstretcher. Poundstretcher themselves used a CVA to reduce costs. They exited in 2022 paying just 12p in the £1 to its unsecured creditorsIf such a big retailer were to fail this would send shockwaves through the sector and would be a political headache for the Labour Government.
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