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 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.Am I personally liable for any company debts?
Generally, you will not be personally liable for any old company debt unless you’ve contractually signed to pay it personally, typically this would be the bank overdraft or loan, property leases, car and equipment loans etc. CBILS and Bounce Back loans generally do not require a personal guarantee and remain only as an old company liability. The debts that are personally guaranteed can be managed by offering payment terms or by transferring leases and finance agreements into the new company to be used for future trading. There are, however, certain circumstances where a director can be made personally liable to contribute to the estate of a failed old company such as where they have made preferred payments to favoured creditors or transferred assets out of the company at a time when it was insolvent. There are also specific circumstances where personal liability can apply, ie when a director is disqualified and a rare compensation order is made against them and also for the recovery of outstanding taxes where very specific issues such as tax avoidance and evasion and repeated insolvencies are involved. Any liquidator or administrator is obliged to investigate the old company’s activities to see if any of these have taken place and to look to the directors for explanations and potentially a repayment where they see this but if this leads to a claim some liquidators and administrators are more likely to agree a sensible arrangement for a negotiated payment over time while others take a much more aggressive and litigious stance. Therefore, your choice of liquidator or administrator is one of the most important that you will make during this process and by talking you through the marketplace that exists in the insolvency industry, as it does with all industries, we can help you to make that choice.If I am personally liable for debt what can I do about it?
Although you are not expected to know this, your choice of liquidator or administrator is an incredibly important one. Liquidators and administrators are all regulated and have a job to do but some take a more aggressive stance with directors than others, making it difficult to engage and therefore negotiate a sensible outcome to any claims. If we are involved at the outset then we can refer you to a suitable liquidator or administrator but if you’ve already appointed one then we can help you deal with whatever arises as a result of that appointment, including any claims that they make against you to repay overdrawn directors’ loan accounts, illegal dividends, preference payments etc. Separately, business failure can lead to claims against guarantors to repay debts arising from bank or supplier guarantees, under property leases and by HM Revenue & Customs under Personal Liability Notices. In all of these cases we can help you to arrive at a sensible negotiated outcome, first ascertaining if any claim is personal to you and, if it is, whether or not you have the means to pay anything towards that liability. The party making the claim will deal logically with a settlement offer that will yield a return rather than nothing at all so much stress and expense can be saved by sensible informed engagement with them. We can do that for you. All you need to do is contact us and start a conversation.Will I be disqualified as a director?
In 2022/23 the number of disqualified directors totalled 932, slightly up 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.
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.coIf I instruct Clarity Turnaround what is expected of us both and what are the costs?
Coronavirus/COVID-19 ramifications
The new financial landscape
As we emerge from the Pandemic, Government support measures are gradually being withdrawn and businesses are being left to find their own way again in a very challenging financial landscape. Previously deferred taxes have become due and balance sheets now hold significant additional liabilities in the form of CBILS and Bounce Back loans. Many businesses will not survive the challenge and those that can may have to reach for additional funding from non-traditional sources or, failing that, some form of restructuring to clear down their debts. We have brokerage arrangements with a number of suitable lenders to supplement our restructuring offerings so if you are struggling to navigate your way through this brand new environment then we can definitely help you. Retrospective scrutiny of applications for Furlough/Job Retention Scheme grants and CBILS and Bounce Back loans With the understandable necessity for Government to quickly roll out Furlough/Job Retention Scheme grants and CBILS and Bounce Back loans, the inevitable scams arrived. This has led to bank and HMRC scrutiny of suspicious grant and loan applications and, unfortunately, genuine applications have been caught up in the process. As part of this scrutiny, if genuine applicants do not then provide detailed persuasive information to their bank then their accounts can be frozen, even if they have done nothing wrong, with catastrophic effects. If this is happening to you and you can sense that your bank is unhappy with the position then we can help with responses to satisfy the bank that your application was for genuine reasons and avoid having your bank account frozen. However, if the situation has gone further and the account is already frozen then we can introduce you to specialist lawyers who will liaise with your bank and HMRC to unlock the account and allow you access to your funds. 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.comWhat 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.