Credit union still banking with the Co-Op Bank?

You might have seen today’s – I have to say not completely unexpected – news that the Co-Op is up for sale.

It’s been coming for a long time.

So, you’re a director of a credit union that is still banking with the Co-Op that still has hundreds of thousands of pounds in it?

Let me ask you something …Why is that?

Is it simply that because you believe in the co-operative movement you will support it where ever you can?

That’s great, the co-operative movement has done and continues to do a lot of really very good things.  But the problem is if you’d been acting on purely commercial grounds – which is the test you are required to satisfy as a director – you would probably have moved the money out of the Co-Op a long time ago.

Let me ask you, given that there’s no certainty that the Co-Op Bank can be sold, and won’t instead be either broken up or go bust, do you think you might be playing Russian roulette with your members’ money given today’s news – which after all followed a pretty inglorious few years (facts like this will be relevant to the points below, it’s not as if you’re in the dark about the Co-Op Bank’s problems or that they’ve happened overnight)?

The point is you might only have a short period of time now to get your members’ money out of the Co-Op and into something safer…

And if you don’t do so, let me ask you another question…

If your credit union should be forced under by the problems at the Co-Op Bank and your liquidator took you personally to court for negligence, would you be able to defeat such an action?

It might just be worthwhile you asking your lawyers this question… you see, your following a principle that is not built on hard commercial grounds is probably no defence.

Oh, and an afterthought… some directors of your credit union will have deeper pockets than others and will therefore be the main targets of such a negligence action.  Are you one of the prime targets? You see it’s easier for board members who have nothing to lose personally to stick to their principles, but if your home and savings are on the line, then it’s a completely different proposition.

Credit Unions – it’s far from good news, in fact it’s awful!

I don’t know if you saw the news today?  – How the UK’s credit union assets hit £3 billion for the first time ever?  – click here to see the news from ABCUL

Great news, eh?

Well no…

Why?

Well, today, yes the very same day that ABCUL announced this ‘great news’ about assets, a letter hit my desk from the Co-Op Bank saying that they are reducing the interest they will be paying on bank balances me as liquidator of credit unions, and indeed credit unions themselves, hold with them.

The interest rate?    O.03% on balances up £500k.  That’s right, one thirty third of one per cent in interest.

To put it bluntly, bugger all on balances most credit unions might be holding with the Co-Op Bank…about one fiftieth of the inflation rate.

Please let me ask you something…

What’s exactly is the point of credit unions putting their savers’ money with the Co-Op?

Why do they do it?

The vast bulk of the £1.23 billion in credit union saver deposits – the ‘good news’ is its ‘s by 7.8% over the previous year –  yes, one and a quarter billion pounds, a lot of money, and counting! – is earning nothing for savers, not after the credit union costs.

I tell you what the point of credit unions putting their savers’ money with the Co-Op and them paying nothing in interest is…

The Co-Op is bust…

And if it goes under – and it is a shambles – the FSCS also goes under, its pocket is simply not big enough to cope with the Co-Op’s failure.

Put another way, all you savers in credit unions are propping up a bust bank because (1) Co-Operatives are incapable of surviving in this country today in the way they used to be able to, and management are incapable of turning the Co-Op Bank around, it’s a shambles internally; (2) The FSCS cannot pay out if the Co-Op goes bust – we’re talking about a bail-in, rather than bail out (a bail out, some government organisation pays you back all your money: a bail in, you do not get all your money back, you have to write some of it off, you might be told that the £1,00 you had with so and so bank is no only £500.

If Co-Op goes bust, there will be a run on all of the banks.  Co-Op is propped up by credit union savers’ and other ‘soft’ money – if you’re a saver in a credit union, have you really asked where the credit union puts your money?  Hopefully time will paper over the cracks at the Co-Op…- but will it, and why haven’t you been told that your money is at risk, why are you being told that credit unions are a good place for you to put your money safely?

Thanks to all you savers, old and new, you are propping up a bust bank that we cannot afford for it to fail because the system can’t cope with it doing so!

Oh, did no one, not ABCUL, not any credit union, tell you why you’re being encouraged in?

It’s a huge game of pass the parcel!

If you are a saver, you are playing the game, the problem is you’ve no chance of winning a prize, because the music will never stop when you’re holding the parcel.   Instead you’ll be left holding all the wrapping paper for which you will have paid handsomely, and you’ll not get your money back because you will be bailed in…

Still happy with the advice you got to ‘save’ with that credit union?

Will you be suing the advisor for bad advice, like the PPI sellers of yesteryear?

Worried about going bankrupt? – now do it online!

A lot of people are worried about going bankrupt, often for the wrong reasons – the law and experience of bankruptcy aren’t what they used to be; they’re worried about the stigma; they are worried about appearing in fron of a judge.

Really, as long as people filled out their debtor’s petition abouit right – don’t you just hate that word ‘debtor’? – I know I do – they never appeared in front of the court, it was a closed door exercise while they sat in the waiting room – yet it will still probably be a long time before people realise it’s nowhere near as bad as you might think, as those who have gone through it recently are, in comparable terms, few and far between.  But finally there’s some movement on the court side…

Over recent years all aspects of government have been moving lock stock and barrel online in an effort to save costs and improve efficiency. Finally, after much talking, people with big financial problems are able to petition for their own bankruptcy online, there’s no need to go to court, thus one of the major obstacles that put off people doing what they really need to be doing has been removed.

Will we see more people going bankrupt now that they can sit at a computer and press a few buttons?  I suspect so, but not in great numbers because the stigma of bankruptcy aka ‘failure’ remains – it’s a British thing, tell any American how you feel and they will just laugh at you.

If you need to make yourself bankrupt, just go to https://www.gov.uk/apply-for-bankruptcy 

As you will see, it’s a https ie should be a safe address

If you’ve been putting it off and really ought to do it but have been worried abouit facing up to people, just do it!

 

Paul Brindley

Have you been asked to personally pay the costs of liquidating your company?

A day doesn’t go by without me seeing at least one instance of a director being asked by an insolvency practitioner to personally pay the costs of putting their company into creditors’ voluntary, ie insolvent, liquidation.

If this is you, here’s a few questions for you…

What’s the insolvency practitioner said about your responsibility for paying those costs?

Were all of your options explained to you?

The answer to these questions is typically ‘not a lot’ and ‘I don’t know’, all that was said is ‘a CVL is quicker and more convenient way for you to close down the company’.

It might be, it might not be, but let me ask you another question, and this is the knub…

Can you do something better with your money – typically £2,500, £3,000 or £5,000 – like finance your new business, pay down personal debt, or even take a well earned break – than pay an insolvency practitioner’s fees?

Of course you can, because whatever way you look at it, spending your hard earned money – and I’m even seeing directors who go into personal debt on credit card to pay such fees, even after losing their sole source of income – on dealing with a historic issue isn’t great value for money.  Yes, there are low cost alternatives to a formal insolvency process.

So why is this happening?  Why am I being told that CVL is the best option?

Well, there are 2 reasons.

Firstly, insolvency is a incredibly complicated and grey legal area, it’s ever so easy for an insolvency practitioner to say ‘a CVL is the right route for you’ without that statement really being put to the test.

Secondly, many insolvency firms depend on selling directors what I would argue are bad solutions to survive themselves – unless they pile small CVLs high and sell them cheap, the insolvency firm would itself be bust!

It is time for some uncomfortable truth...

There is nothing in the law that says any director has to use his/her own money to personally pay for the liquidation of their company.

Let’s repeat that so it hits home…

There is nothing in the law that says any director has to use his/her own money to personally pay for the liquidation of their company.

Find any such reference either in statute or case law and I’ll pay you £500.

You see the law only says you have to stop making the creditors’ position any worse.  In most instances you can do that by simply ceasing to trade.

But there’s a problem…

You still you need closure.  You need to close down the business and the company.

The secret that many IPs would like to keep from you is that can be achieved without you throwing your money down the drain.

August Business Opportunities Listing

Here’s our latest business opportunities listing…

 

Collection of top quality workshop equipment for sale (08/01)

Our sister company Asset Disposal Services is selling by auction through Bidspotter  a collection of top quality pristine workshop equipment including several sets of Stertil Koni Mobile Column Lifts – ideal for maintenace shops working on commercial vehicles, buses, coaches, mining equipment and fork lift trucks.  The word Bidspotter above is a link that will take you to the auction site.

 

Trailers wanted (08/02)

Midlands bsed cash buyer is looking to buy a short water tank trailer – or indeed a curtain or flat bed trailer – or similar to use as MOT test trailers.

 

Food business wanted (08/03)

Chinese investor seeks to buy a food business with brands that can be exported and sold to the middle classes in China.

 

Deposit taking bank sought (08/04)

Chinese investor seeks to buy UK/European deposit taking bank that can do cross border FX settlement and are licensed to do asset management and/or sell insurance products.  Small to mid-size or boutique prefered.

 

£1/2m sought by dementia care provider (08/05)

This impressive, skilled lady is seeking to raise the deposit on a £20m project to provide a 200 bed innovative care facility for patients with late stage dementia.  Sole UK licence for proven European model; land, architects drawings and outline planning obtained; expert team in place.  A truly inspirational project…

 

How it works…

You pass this mailer around to people you know, either by email or using the social share buttons.  You or they email me with any interest – paul@midlandsbusinessrecovery.co.uk  . I put you in touch, you negotiate direct.  If a deal gets completed I get paid an introductory fee by the other party, there’s no cost to you.  These circulars are sent once, and once only – if you miss a mailer, you’ve missed the opportunity!

Paul Brindley
Licensed insolvency practitioner
Midlands Business Recovery
Tel 01902 672323