Clarity Turnaround: Skilled and experienced allies and a friend on your side fighting your corner at a time when you really need it.
Clarity Turnaround: Who we are and what we can do for you
Clarity Turnaround provides well informed, pragmatic advice for directors unexpectedly thrown into a complex and perilous environment when financial difficulty sets in. Some of us have been there ourselves and our combined experiences make us skilled and experienced allies and a friend on your side fighting your corner at a time when you really need it.
We can introduce funders from our very selective panel to refinance an ailing business but we can also introduce lawyers, valuers, regulated insolvency practitioners and other professionals into the mix to deal with anything that requires more than just negotiation and replacement funding.
We can assist with any level of distress, from negotiating a Payment Plan with HM Revenue & Customs and releasing funding from company assets, to providing a Project Management service for a full Liquidation or Administration prepack, covering all points between.
We will remain involved after our engagement and work with you should any claims arise against you, with aftercare support provided as part of our relationship. We will not walk away from you.
We assume that you are visiting this website as your business is facing some financial difficulty so, rather than outlining the various options that we can provide, it covers the areas of concern that company directors often flag up by way of a small but very relevant selection of questions that we are frequently asked together with our answers to those questions.
These questions and answers are followed by an explanation of how our relationships work with our clients, our fees and costs and a little about our Clarity Turnaround business and culture.
If you have any questions or you think that you could benefit from a general chat then feel free to phone 01494 857190 or email at info@clarityturnaround.com
I’ve received a winding up petition and I can’t pay it off. What can I do?
After finally losing patience, a creditor might well increase the pressure by issuing a winding up petition to try to force your company into paying what’s owed or, in the case of HM Revenue & Customs, to bring everything to a head in the public interest by driving it towards a High Court governed Compulsory Liquidation.
If you can’t pay off a petition debt and you don’t act swiftly your choices will steadily reduce and the position may then spiral out of control.
Although a petition is issued on a specific date (you will soon know if a petition has been issued as you will immediately receive phone calls and mailshots from various consultancies offering a wide variety of sometimes confusing options) it will take a little time for it to become visible to the outside world when the petition and its hearing date are advertised in the London Gazette. The company bank account will then almost certainly be frozen as part of a process which protects the company’s assets from being disposed of, creating critical trading difficulties which can prove terminal if no action is taken.
The period between the issue and the advertisement of a petition is invaluable as it gives you the time to explore the options available to you. Those options range from cutting a Time to Pay deal with the petitioning creditor, implementing a Company Voluntary Arrangement to park some or all of the debt for five years, liquidating the company yourself in a Voluntary Liquidation and avoiding the issues that come with a taxpayer funded liquidator, or implementing a prepack restart process to move the business and assets to a separate company with the same name but without the debts.
We can help you to choose the most suitable option for you and manage the issues by applying decades of experience, a tremendous network of professionals and a huge capacity for lateral thinking which will combine to provide a soft landing for your business and a sensible outcome for the stakeholders, including you, your family and your staff.
If you have any questions or you think that you could benefit from a general chat then feel free to phone 01494 857190 or email at info@clarityturnaround.com
My Company Voluntary Arrangement is unravelling. What can I do?
A recent Insolvency industry evaluation (Company Voluntary Arrangements: Evaluating Success and Failure, R3 and ICAEW, May 2018) reveals that out of the 552 CVAs commenced in 2013, 65% were terminated without achieving their intended aims. Some 31% of those were terminated within 18 months.
In short, the statistics show very poor outcomes and these numbers do not even include CVAs that have not formally failed but which are nonetheless not functioning and are awaiting formal failure.
CVAs are therefore very fragile, particularly within the first year or so, as a company in a CVA:
- has no credit rating for the entire length of the CVA and, as a result, will encounter difficulties in putting on new business;
- is obliged to pay some old supplier debt to maintain continuity of supply, often leaving HMRC as the only, or nearly the only, creditor;
- often has a difficult relationship with its lender as a result of their aversion to CVA fragility;
- is often obliged by HM Revenue & Customs modifications to guarantee a minimum dividend to creditors;
- regularly, despite having paid its monthly contributions on time, will actually pay no money to creditors during the first 12 months and, based on the statistics above, no money at all to creditors by the time that the CVA is terminated;
- almost without exception is governed by a CVA Proposal which does not cater for redundancy pay, a significant liability and a missed opportunity for older companies with long serving directors and employees;
- must disclose and define any overdrawn Directors’ Loan Account balances before the period accounts have been agreed and filed, obliging repayment in very early course (generally inside 3 to 6 months at the insistence of HM Revenue & Customs) of a potentially incorrect balance.
If your CVA is showing signs of unravelling then it is important to take advice on the options available to protect the business and bring it to a soft landing through another more appropriate and relevant procedure.
The Clarity Turnaround team has handled many CVA turnarounds over the years with a plethora of different offerings and procedures, including refinancing, formal Variation Applications and prepacking CVA businesses into restart companies.
We know that choosing a different procedure may also solve a number of the bullet point issues outlined above and, in short, we have the answers to the difficult questions faced by directors when their CVA is moving towards a failure.
If you simply want a CVA health check then let us know and we’ll be happy to do that. If more is required then we’ll help in any way that we can to get the business through to a soft landing.
If you have any questions or you think that you could benefit from a general chat then feel free to phone 01494 857190 or email at info@clarityturnaround.com
If my company goes bust what problems could I face?
Can I restart my business in a new company and will Clarity Turnaround help me to do that?
Yes and yes.
Generally, unless you are disqualified as a director or you are an undischarged bankrupt, you can be a director in as many other companies as you wish so yes, you can restart your business in a new company if your old company goes bust.
Clarity Turnaround can assist you with incorporating that new company, applying for PAYE/VAT registration, obtaining a new bank account and asset/invoice finance facilities and supporting you before, during and after the process.
You will most probably wish to be a Director in the new company so we will also help you to deal with any timing issues that arise and support you while the business gets on its feet.
Can I be a director in a new company with the same name/ brand as my old company?
As long as that new company acquires the assets/business of the old company from its liquidator or administrator and the director(s) validates the process by a formal notification to creditors or successfully applies to Court to re-use the old company name/brand.
This is a hugely important issue as penalties for ignoring the validation process are hugely punishing, involving a criminal offence and personal liability for debt. We have an arrangement with specialist solicitors who, for a small fee, will undertake the necessary validation process on your behalf to remove your exposure to these penalties.
Fighting claims against Directors and Guarantors
We are not regulated insolvency practitioners (ie. liquidators and administrators) and have no desire to join that team. That is a considerable advantage to any client as we are able to actually advise you on how to prepare for and fight their claims, lifting the doubt and misery that comes with you having never been exposed to anything similar before. The insolvency practitioner has his job to do and that does not include advising you on how to fight their claims. Instead, that is where we come in, having often been introduced by an insolvency practitioner or a funder who is making the claim in order to achieve the optimum result for all involved.
We have extensive knowledge and experience in fighting claims against Directors and Guarantors and a great success in negotiating them down or away. It is helpful if we are dealing with a liquidator that we have introduced as we will have a sympathetic ear but it is not essential.
Broadly speaking once your company goes bust an investigation by the liquidator or administrator will throw up a series of questions for you to answer which may then generate claims against you personally for:
- Overdrawn Director’s Loan Account balances
- Misfeasance
- Wrongful Trading
- HMRC Personal Contribution Notices
- Directors Disqualification Compensation
…… to name just a few for your search engine of choice.
Do not ignore those claims as they could wipe you out if you do that and the liquidator or administrator pursues them or, worse, sells those claims that they can to a litigation funder with deep pockets who will fund actions against you which could cost you your house!
If you talk to us when your company goes bust and when questions start to be asked we can advise you on the areas where you are vulnerable to claims and then see if they can be repaired with new management information or filed accounts, Director’s Loan Account reconciliations and explanations as to why the numbers are what they are. Then we can engage with the liquidator or administrator to help you to remove or reduce in size any claims against you.
Separately if you have guaranteed any company loans given by businesses such as Funding Circle, IWOCA, Capital on Tap, Federal Capital etc, or perhaps the company’s bank, then we can approach them to request a cap on the interest charges and then either offer payment over time or a reduced full and final settlement payment, depending on your circumstances.
There are many areas where directors can attract personal liability following the failure of their businesses, but there is always something to be done. Do contact us and we will review your position with no cost until you formally involve us.
Will I be disqualified as a director?
In 2022/23 the number of disqualified directors totalled 932, slightly down on the previous year’s total of 1,243, with an average disqualification length of 7 years and 4 months.
The vast majority of those disqualifications were dealt with by way of negotiated undertakings with only a small number by way of Court Orders.
The most common allegations made in director disqualifications recently relate to COVID-19 financial support scheme abuses and more traditionally that the Crown (which usually refers to HM Revenue and Customs) has been unfairly treated. Unfair treatment of the Crown can range from cases where a director had made a conscious decision to pay other creditors rather than company taxes to cases where a director has defrauded or attempted to defraud HM Revenue and Customs. Unfair treatment of the Crown has been the most common allegation made since comparable records began in 2011/12.
Every director in every insolvent company is a potential target for disqualification so the above statistics reveal the low probability of any individual director facing disqualification action and the major reason for disqualification targeting being unfair treatment of the Crown.
However, it is important that directors understand that other factors play a role in the disqualification targeting decision, such as the identification of any criminal activity and a director’s multiple business failures and that periods of disqualification span between 2 and 15 years depending on the circumstances.
It is equally important that directors are aware that in the event that they are disqualified, and it is ruled that they have deliberately set out to deprive the Crown of taxes then those directors can be made jointly and severally liable with the company to reimburse those taxes from their personal assets.
The statistics quoted above disclose that the Insolvency Service (IS) gained Disqualification Orders or Undertakings, which have the same effect but are generally for a shorter term, in respect of 932 individuals during 2022/23 Some 25,158 companies entered into a formal insolvency process during the year ended 31 December 2023.
Using the IS statistics, it is apparent that, crudely, one director was disqualified for every twenty five companies that entered into a formal insolvency process and, of course, many if not the majority of the companies held more than one director, so the probability of Disqualification is actually lower.
It is also important to point out that a very significant majority of those directors who were disqualified agreed to proceed by way of negotiated undertakings rather than by way of Court Orders, leading to reduced periods of disqualification and potentially to applications by those directors for ongoing Leave to Act as directors in their new companies given suitable representations being made.
The probability of DBIS targeting an individual for Disqualification is low but directors can improve their chances of avoiding being targeted for Disqualification by taking some very simple steps involving:
- the delivery up of the old company’s books and records at the outset.
- complying with the liquidator’s or administrator’s requests and.
- the submission of a comprehensive response to their initial paperwork, specifically the Company Directors Disqualification Act questionnaire which forms part of the bundle submitted to the Insolvency Service.
We at Clarity Turnaround have dealt with the preparation and submission of many Disqualification questionnaires and we have found that a robust response can yield dividends in terms of persuading the Insolvency Service that Disqualification is either not appropriate or that a shorter period of disqualification would be a fairer outcome.
Where the Insolvency Service does insist that Disqualification is appropriate a robust attitude from the outset can lead to an offer of a reduced Disqualification term to below 7 years, a threshold which allows an individual the ability to seek Leave of the Court to act as a director in a new company, subject to undertakings being given on future conduct, providing a satisfactory result in testing circumstances.
For example, lately we have been involved in negotiating a reduction in the period of disqualification of a client director from the six years on offer to just three years. Concurrently that director was granted Leave to Act as a director in a company trading with the same brand as the failed old company and as a member in a separate Limited Liability Partnership enabling him to be paid in a tax efficient manner by way of dividends and drawings respectively and also giving him the ability to promote the ongoing business.
As the Application for Leave to act is a formal legal process, we will introduce you to a suitable lawyer from our panel who will handle the application and talk you through the mechanics of acting as a director during a reduced Disqualification term.
What about my overdrawn Directors Loan Account?
When a company goes into liquidation or administration the last filed accounts may reveal that the director(s) owe the company money under an overdrawn Directors Loan Account. Perhaps, they have taken their remuneration in lump sums in the expectation that profits will be disclosed in the next accounts which will cover what they have taken.
The period subsequent to the last filed accounts but before liquidation or administration is likely to lead to a worsening of the position as this is when the company started to fail. It is therefore unlikely that profits or reserves will be available to cover any remuneration that the directors have taken.
In these circumstances any remuneration taken without profits and reserves to cover it is considered as an illegal dividend which is repayable to the company. The liquidator or administrator is likely to calculate the amount that the directors have taken outside their payroll wages and claim against them for what are then overdrawn Directors Loan Accounts.
Again, some liquidators or administrators are more likely to reach a sensible arrangement with a director for a reconciled outcome and, if there is an overdrawn Directors Loan Account, a negotiated payment over time, while others take a much more aggressive line.
It is therefore important that you are mindful of your choice of liquidator or administrator and that you engage with them to achieve a sensible outcome. We can assist with both by giving an informed view on the choice available and by performing a reconciliation of the relevant transactions and, if necessary, preparing accounts to disclose the true position rather than an approximate one.
If you have any questions or you think that you could benefit from a general chat then feel free to phone 01494 857190 or email at info@clarityturnaround.com
If I instruct Clarity Turnaround what is expected of us both and what are the costs?
What do I need to know about Clarity Turnaround?
Clarity Turnaround opened for business in 2012, merging at that time with a group of other turnaround and finance businesses with decades of their own successes, to offer pragmatic assistance, lateral thinking and finance products to directors with financial issues to solve.