G&K For advice on insolvency issues call us on your local number opposite www.griffinandking.co.uk | email: janet.peacock@griffinandking.co.uk See us on: G&K Contd. from page 1 and suppliers. The directors contacted us a few weeks ago and the company had no alternative but to enter liquidation. Creditors (including HMRC, suppliers and loans) are now running at over £300,000. The company has lost around £300,000 in just over 12 months. The directors now have personal guarantees of around £130,000 which is likely to mean that they will need to sell their homes. The effect of this loan was to transfer £140,000 corporate liability to personal liability. Not very clever! Unfortunately, of course, the directors don’t even speak to their accountant when they borrow in this way. That’s another good reason to have a close relationship with the company accountant. Directors be very careful! Borrowing money, especially with personal guarantees has very serious implications…for YOU! If a director isn’t sure about the best way forward for the business we’d be pleased to assist with an independent, no nonsense appraisal of the business. That’s what we’re good at. Please call now. G&K ZOMBIE COMPANIES A recent (BIS) Bank of International Settlements report has said that the economic recovery is being held back by the so called “zombie” companies which should be allowed to fail. Zombie firms; are firms that are unable to cover debt servicing costs from current profits over an extended period of time, have recently attracted increasing attention in both academic and policy circles. Caballero et al (2008) coined the term in their analysis of the Japanese “lost decade” of the 1990s. More recently, Adalet McGowan et al (2017) have shown that the prevalence of such companies as a share of the total population of non-financial companies (the zombie share) has increased significantly in the wake of the Great Financial Crisis (GFC) across advanced economies more generally. Zombie firms are companies that would have defaulted in a normal economic cycle but continue to function due to an ultra-low interest rate environment. These companies are clinging on despite the recession making markets and the economy inefficient. Contd. on page 3 IVA’S. WHAT DEBTS CAN AND CAN’T BE INCLUDED. By Tim Corfield We all know what an IVA is. It’s an alternative to bankruptcy, which in certain circumstances does work better for the debtor. Below is a reminder of what debts can and can’t be included in an IVA. Debts that can be included: • Credit cards • Unsecured loans • Overdrafts (unsecured) • Hire purchase on vehicles or equipment no longer needed • HMRC – VAT, PAYE, personal tax or national insurance • Money owed to friends or family • Store cards • Excess debt on repossessed properties Debts that can’t be included: • Student loans • Other educational loans • Criminal court fines • Traffic offence fines or parking tickets • Borrowings secured on property • Child support debts • Hire purchase debts on vehicles or equipment needed • Arrears on rental property which is occupied Of course, if in any doubt call us. We pride ourselves on explaining, in layman’s terms, the pros and cons of an IVA and how it fits into the debtor’s circumstances. If we don’t think an IVA is right, we’ll say! If you have any questions or think we might be able to help please call 01922 722205 speak to Tim Corfield, Janet Peacock, Cheryl Gray or anyone of the team always happy to help.