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
Typhoo Tea In Administration Threat
One of the Britain's oldest tea companies has filed an intention to appoint administrators in the court.This follows a very difficult year with sales falling and an expensive break in at one of its factories. Sales fell from £38m to £25m in 2023 and it had to take an exception cost of £24m relating to the damage of stock and equipment following the break in.The company was founded in 1903 by grocer John Sumner and was at one time the best selling tea brand in the UK.It should be noted that the intention to appoint administrators is a way of protecting the company from aggressive creditor actions, such as winding up petitions. It gives the company protection for 10 days whilst it tries to rescue the business. This might be additional finance or a sale. EY is named as the possible administrator and will be looking at the options.Private equity firm Zetland Capital has been the company’s majority shareholder since 2021. Typhoo’s debts stood at £73m at the end of September 2023, compared to £53m a year earlier.According to the company's accounts it has made losses in excess of £40m every year since 2019.
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