A message for all you business consultants out there who are struggling for an answer to a client's problems…

No one knows all the answers, that’s why my Business Resuscitation work is so very vital…


Let me ask you a question –
Do you have any clients who could benefit from some innovative support from a licensed insolvency practitioner?  

Please bear with me, I am not talking about business closure here, this is about achieving for your clients some really great results that you will not be able to achieve on your own…  
  

You see a long time ago I formed the view that insolvency practitioners should be doing far more than just closing businesses down, and because whatever the mind can conceive and believe, it can achieve, I invested heavily in what I call my Business Resuscitation Programme™.  And believe me, this service is unique, I’ve left them all my competitors in my wake.

My Business Resuscitation work puts businesses in touch with the people and organisations that provide exactly what they need but cannot easily get elsewhere, whether it be cash, skills, a business to buy or merge with, a buyer of their business, a joint venture partner … the list goes on, it’s that flexible.

Built initially to save struggling businesses, it’s now being used by businesses at all stages of the cycle.
You see it provides solutions your clients never thought possible.  So if you ever find yourself scratching your head unable to find the optimum solution for a client, just give me a call – I’d be glad to explain how it works.  Just remember one thing, now with my Business Resuscitation Programme neither you nor your clients will ever have to settle for second best.  And if you don’t need me just yet, please retain this mailer because at some time you will.

Paul Brindley FCA
paul@midlandsbusinessrecovery.co.uk      Tel: 01902 67232301902 672323

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A message for all you business consultants out there who are struggling for an answer to a client’s problems…

No one knows all the answers, that’s why my Business Resuscitation work is so very vital…


Let me ask you a question –
Do you have any clients who could benefit from some innovative support from a licensed insolvency practitioner?  

Please bear with me, I am not talking about business closure here, this is about achieving for your clients some really great results that you will not be able to achieve on your own…  
  

You see a long time ago I formed the view that insolvency practitioners should be doing far more than just closing businesses down, and because whatever the mind can conceive and believe, it can achieve, I invested heavily in what I call my Business Resuscitation Programme™.  And believe me, this service is unique, I’ve left them all my competitors in my wake.

My Business Resuscitation work puts businesses in touch with the people and organisations that provide exactly what they need but cannot easily get elsewhere, whether it be cash, skills, a business to buy or merge with, a buyer of their business, a joint venture partner … the list goes on, it’s that flexible.

Built initially to save struggling businesses, it’s now being used by businesses at all stages of the cycle.
You see it provides solutions your clients never thought possible.  So if you ever find yourself scratching your head unable to find the optimum solution for a client, just give me a call – I’d be glad to explain how it works.  Just remember one thing, now with my Business Resuscitation Programme neither you nor your clients will ever have to settle for second best.  And if you don’t need me just yet, please retain this mailer because at some time you will.

Paul Brindley FCA
paul@midlandsbusinessrecovery.co.uk      Tel: 01902 67232301902 672323

Call

Send SMS

Add to Skype

You’ll need Skype CreditFree via Skype

The increase in interest rates by the banks and building societies

During the last 18 months or so a good number of banks have increased their standard variable and tracker rate mortgages citing as their reasons for doing so a rise in their cost of funding and compliance with the regulators’ requirements to increase their reserves.

The question is, given that the Bank of England Base Rate hasn’t changed since it hit its all time low in Spring 2009, Basel II compliance is a known fact for each bank and compliance with the tougher Basel III rules has been pushed out to 2018, is it (i) reasonable; and (ii) legal for individual banks to impose the increases they did in 2012 for the reasons they gave, and not reverse them and hand the money back?

Let’s put this in context.  As I write this in November 2013, the banks remain in big trouble (even if their accounts don’t always show it) with many massively exposed to the property market, they’re reducing how much they’re lending out, increasing their net interest margin (charging customers more to borrow while at the same time paying little or no interest to depositors), managing their delinquent debts so that they keep their write offs to a minimum, and changing the way they’re funded.  It’s not an easy time to be managing a bank, there’s a fine balancing act to be struck.  Getting it wrong could prove disastrous for individual banks, the whole financial sector and our way of life in the West.

Many hundreds of thousands of borrowers feel abused right now.  They are incandescent with the increases that have been imposed on them.  They cite the factors mentioned above.  They feel abandoned by the regulator.  They feel they are bearing more of the burden than they should for rebuilding the banks’ balance sheets.  And who can blame them, after all when they borrowed the money they thought they understood the parameters under which they were borrowing.  As a consequence MPs have been bombarded with complaints from disgruntled constituents.  The regulators meanwhile seem uninterested, regardless of whether the complaint is about regulated or unregulated lending – we’re being let down by a system we’ve been assured has been strengthened.

So are the increases reasonable?  The banks would argue that by charging less than 5% interest on a standard variable rate or tracker mortgage, borrowers are paying less than the long term average mortgage interest rate. They feel that exceptional circumstances – the near collapse of the banking system – demand exceptional actions.  And a 2 or so per cent rise is within the boundaries of what’s reasonable in the circumstances.  Borrowers feel otherwise, they feel they’re being taken advantage of, they’re being asked to pay more than their fair share of the cost of rebuilding the bank just because with few banks really lending right now the option of moving isn’t really on.

But are their actions legal?  The banks think so otherwise they wouldn’t do it.  They’ve obviously had the most expensive lawyers in the land crawl over the legal documents with a fine toothcomb and feel they’re near invincible.  Borrowers believe the banks’ actions are illegal, that they had a deal that rates would closely follow the Base Rate and that that link has effectively been broken.  And some are determined to prove it.

The reality is they’re both right, to a degree.  Exceptional circumstances do demand exceptional actions.  Reasonableness doesn’t come into the equation, legality is the key issue.  And I believe the real question we should all be asking is:

‘Is this particular bank’s actions legal given:

  1. The formal legal relationship existing between the parties
  2. The particular circumstances applying in this / the bank’s case, including the bank’s financial situation?’

The situation is different in every case – so borrowers’ hopes that one legal case taken by an aggrieved set of borrowers against one lender will somehow set a binding precedent for everyone are probably forlorn.

From a forensic accountant’s point of view, I think these are the key issues:

a)      What do the documents say, exactly? – the actual words used in the documents and how they all fit together are vital.  Do they give rise to a doctrine of contra proferentem issue.

b)      What other parties are involved, such as mortgage advisers, brokers and lawyers?  If no,  bad or incomplete advice has been given to the borrower, the advice is not properly evidenced as having covered the possibility of such events occurring as we’ve seen (bank takeovers, transfers of mortgages etc), or the adviser / lawyer is arguably conflicted say because his fees have been paid by the bank, is there an argument for bringing them into the action and involving their professional indemnity insurers?

c)       What evidence is there that the circumstances in the contract giving the bank the ability to increase rates have been triggered in this particular case?  What evidence is there that the bank’s cost of funding has risen, and by what amount?  What evidence is there on the bank’s reserve position and its compliance with regulator requirements?

d)      Has the bank done everything the documents require as a pre-condition for imposing the increase?

e)      What evidence is there that the bank has calculated the increase properly having regard to the issues in c) and is not abusing its position?   For example, can the bank explain why the increase is 2% and not say, 2.5%, 4%, even 8%?  Has the increase been broken down into its constituent parts of (i) funding costs rise and (ii) regulator reserve requirements and do these calculations stand up to an accountant’s scrutiny?

f)       Has the bank dealt with different borrowers in different ways, and if so, can doing so be justified to the court?  Some banks imposed an increase on borrowers who came to them through mortgage brokers but not on those who came to them direct.  Some have imposed smaller increases on borrowers who happen to live in the bank’s country of origin.  Why?

 

It’s clear that key to aggrieved borrowers succeeding in an action against a bank, either for resisting the increase in rates or any repossession proceedings, is the extraction of best quality evidence to support the arguments being put forward in that particular case.  Some of the vital evidence will come from the lawyer and forensic accountant acting for the borrower from publically available information.  Some will have to come from the bank.  The bank can be expected to do their utmost to resist efforts to release such confidential information.  But release it they must, if the court is to be persuaded that their actions are legal and not just blatant profiteering at the expense of small, seemingly powerless, borrowers.

Ten things you must know about business insolvency…

These are the ten things you need to know about business insolvency:

1. This is a real turning point in your life, treat it as such!

Make sure you have identified in your own mind, and with absolute clarity, what you want to achieve first and foremost, and why.  Then identify what your next best solution is, and why.  And then identify your third best.  This will greatly help your decision-making.  Why? because you’ll probably find you won’t be able to save everything you now ‘hold dear’.

Challenge yourself – do you really want to carry on in a similar business, or would you like a complete change?  If you want to do the same or something similar, ask yourself what you are going to do differently, and how, this time around are you going to make sure it’s a success?

2. The business and the company are not the same thing 

A formal insolvency process can be used to split out a viable business from its insolvent company shell, protecting the business yet ridding it of debts it can’t pay.  This isn’t debt avoidance, it’s finding a practical solution to real life problems.  But is has to be done properly.  Recognise that the business and the company are two different things!

3.  Smaller companies have fewer options and less time to act than bigger businesses

Those on whom smaller companies depend provide less support when things go badly.  Your bank, rather than supporting you, will go into self protection mode.  It’s up to you and your advisers to find a solution, and quickly.

4.  There’s often nothing worthwhile saving in the smallest of companies

The informal way in which small companies tend to operate often means the goodwill in the business lies in the directors and key staff, rather than in the company itself.  There’s less reasonfor you or an insolvency practitioner to spend time, money and effort to save the company.  It’s this that often makes liquidation the most appropriate route for small companies.

5.  All formal insolvency procedures damage the business

Some just do more damage than others.  You’ll need to know how the different informal and formal solutions effect your business.  Don’t listen to bland assurances made by any insolvency practitioner or anyone else that the insolvency won’t have any repercussions on the business, because it will!

6.  Cost is a big issue in choosing any insolvency process

Every formal insolvency process is expensive, some more so than others.  Cost is, in relative terms, a far bigger issue for smaller companies.  This can mean, for example, that the cost of an administration of a small company can outweigh any benefits gained: a sale of the business and assets followed by a liquidation could be a less expensive option.

7.  Not all insolvency procedures are the same

Each procedure has its own nuances, from the outside they seem subtle but they’re not.  It’s vital that the right procedure is chosen, and that can be determined by what may to you seem to be small factors.  It’s important to consider all the options.

8.  You’re not obliged to spend your own money to pay the insolvency practitioner’s fees

If there’s not enough money or assets in the company to pay for the insolvency process, there are alternatives.  Couldn’t your money be better spent, say, to finance your new business?

9.  Once the company goes into formal insolvency, you lose all control

The insolvency practitioner makes the decisions.  It’s important you know his intended strategy, right from the planning stage.

10.  Liquidation doesn’t stop you earning a living

In the UK responsible entrepreneurs are encouraged to give it another go – indeed many of today’s most successful businessmen weren’t a success first, second, third, even fourth time around.  However, setting up a phoenix operation isn’t always that easy as the banks, customers and suppliers are not always as supportive as you’d like or expect.   An added complication is that the rules over re-using the company’s name, should the company go into formal insolvency, are unnecessarily complex.  And if you breach those rules, there are severe penalties, including personal liability for the debts of newco should it fail.

Go into your meeting with an insolvency practitioner with these points uppermost in your mind.  Then, and only then, can you hope to make the right decisions.

If you’d like to buy a copy of my e-book preparing you for that meeting, go to my website at www.midlandsbusinessrecovery.co.uk

What else do you need to know to solve your debt problems?

 

Some people have several options to solve their financial problems.

The problem is no one solution is ever ideal, each will mean you giving up something.  You’ll have to compromise.

Get used to this.

Focus on the bigger prize of losing your unsecured debt.

Take time to assess the relative merits of each solution.

Have in mind throughout that there’s a trade off between the control you have over the process and the amount of debt written off.  How prepared are you to surrender to a formal insolvency process?

If writing off debt is what you really want or need, as this is normally achieved through a formal insolvency process, be prepared to ‘lose control’ of any assets you have.  This isn’t as bad as it first sounds – if you know how the process works, you can still be reasonably certain of the outcome, what assets you may or may not lose.

If retaining control is important, then look at taking one of the more informal solutions.  But recognise that you will probably not be able to write off so much debt.

If you’d like to talk things over with us, call Paul on 01902 672323.