Insurers must pay many small firms for Covid lockdown losses

Tens of thousands of small businesses will receive insurance payouts covering losses from the first national lockdown, following a court ruling.

The Supreme Court found largely in favour of small firms receiving payments from business interruption insurance policies.

For some businesses it could provide a lifeline, allowing them to trade beyond the coronavirus crisis.

The ruling could cost the insurance sector hundreds of millions of pounds.

The City watchdog, the Financial Conduct Authority (FCA), brought the test case, with eight insurers agreeing to take part in proceedings.

One of the insurers set to make significant payouts is Hiscox, which was challenged by thousands of its policyholders as part of the case.

Richard Leedham, who represented the Hiscox Action Group - on behalf of small businesses, said: "This is a landmark victory for a small group of businesses who took on a huge insurance player and have been fully vindicated.

"What is important now is that Hiscox accepts the Supreme Court's verdict and starts paying out to its policy holders, many of whom are in danger of going under".

Other insurers involved in the test case are Arch, Argenta, MS Amlin, QBE and RSA - but as many as 60 insurers sold similar products. They will now pay out on many, but not all, policies.

Huw Evans, director general of the Association of British Insurers, said: "All valid claims will be settled as soon as possible and in many cases the process of settling claims has begun.

"We recognise this has been a particularly difficult time for many small businesses and naturally regret the Covid-19 restrictions have led to disputes with some customers."

What is this case about?

In the lockdown of last spring, many small businesses made claims through business interruption insurance policies for loss of earnings when they had to close.

But many insurers refused to pay, arguing only the most specialist policies had cover for such unprecedented restrictions.

It was agreed that a selection of policy wordings should be tested in court, setting the parameters for what would be considered a valid claim.

The ruling provides guidance for a wider pool of 700 policies, potentially affecting 370,000 small businesses - although only some of these will end up with payouts.

Giving the court's ruling, Lord Hamblen said the court accepted the arguments from representatives of policyholders and dismissed appeals from insurers against an earlier judgement finding in policyholders' favour.

The complex ruling covered issues such as disease clauses, whether business were denied access to the properties, and the timing of lost earnings.

James Ollerenshaw's hair salon was one of those businesses unable to operate during the first national lockdown.

The business - The Drawing Room in London's Spitalfields - paid an annual premium of £1,200 for business interruption insurance, and disease cover came as part of it.

Mr Ollerenshaw said the Supreme Court's decision would not directly affect his policy, but would decide the principles on claims such as his - and were vital for the business.

"A payout would cover the major costs, which is the rent. We have debt sitting there," he said.

He said he was delighted with the Supreme Court's ruling.

"The insurance industry needs to face up to the fact that it failed customers at their greatest moment of need, destroying companies, livelihoods and jobs," he said.

He formed a Covid Claims Group, joining other small business owners in calling for a quick resolution and payouts.

"Time matters," he said, pointing out that some small businesses have been forced to close down while waiting for the decision.

Sheldon Mills, from the FCA, which brought the case on behalf of policyholders, said: "Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. Today's judgment decisively removes many of the roadblocks to claims by policyholders.

"We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible."

The test case was fast-tracked to the highest court in England and Wales - the Supreme Court, which heard four days of legal representations in November. The final ruling provides authoritative guidance for these policies, and potentially of similar ones not part of the case.

The FCA, the insurance sector, and the Financial Ombudsman will all use the judgement to guide their decisions in other cases.

The Financial Ombudsman Service and courts in Scotland and Northern Ireland are expected to use the judgment to rule on other, similar cases.

Insurance policies would have been amended for new and renewing customers since this issue emerged, so losses from the latest lockdown measures in different parts of the UK would be clearly stated as part of the cover - or not - in new business interruption insurance policies.

Source: BBC

UK Liquidators: Support for Tier 3 businesses in Newark and across Nottinghamshire

We face more tough times with the latest Covid restrictions, but there is support out there for struggling businesses.

Nottinghamshire has returned to Tier 3 - also known as the ‘Very High’ alert level.

The area has dealt with significant disruption over the course of this year, and as we approach Christmas, there seems to be no relief from the trading and financial pressures placed on the Nottinghamshire business community.

The government’s measures to combat the economic effects of coronavirus include the furlough scheme, which has been extended to March31. Although the government schemes continue to provide valuable support to local businesses, for some it will simply not be enough, and professional support may be needed.

So what does being in a Tier 3 area actually mean for businesses trying to find a way through this crisis?


Which businesses can open under Tier 3 restrictions?

• Non-essential shops
• Hairdressing, nail, and beauty salons
• Gyms, leisure, and sports venues (apart from dance and fitness classes)
• Wedding ceremonies can continue to take place with up to 15 people attending, but wedding receptions are banned

Which businesses have to remain closed in Tier 3?

• Hotels, B&Bs, guest houses, and campsites

• Hospitality businesses, unless serving takeaway food and drink or offering delivery, drive-through, or click-and-collect services

• All indoor entertainment/tourist venues (including those located within an outdoor entertainment venue)

If Newark and the Nottingham area remain in Tier 3 over the Christmas period, these restrictions will stay in place.

Our team of licensed insolvency practitioners at UK Liquidators can provide reliable, professional advice for businesses in the area on how best to deal with the coronavirus restrictions.

There may be a number of appropriate rescue and recovery measures available to businesses experiencing financial decline due to the pandemic.

Here are just some of the ways the team at our Nottingham office can support your business at this time:

* Tailored insolvency advice: You may be able to enter a formal insolvency procedure, such as company administration or a CVA, protecting your business from creditor legal action and providing a clearer path through the crisis.

* HMRC Time to Pay: HMRC extended their Time to Pay scheme earlier in the year, and this provides up to 12 months’ additional time to pay your tax arrears. We can advise on your company’s eligibility for this scheme, and negotiate with the tax body on your behalf if required.

* Liquidation support and guidance: We can act as liquidators to close down your company in an orderly manner if no other options are viable, and also advise on whether you can claim redundancy pay as a director.

Source: NewarkAdvertiser

Treasury ‘cash grab’ could increase North East business insolvencies, warns R3 regional chair

A new law that comes into force on 1 December which will move HM Revenue & Customs higher up the creditor ladder could push more struggling North East businesses into insolvency.

That’s the warning from Alexandra Withers, regional chair of insolvency and restructuring trade body R3, in advance of the new Crown Preference rules coming into force.

And in the light of the economic crisis that’s been caused by the pandemic, she is calling on the government to make a last-minute reconsideration of its plans.

The rule change will enable HMRC to recover in priority to other unsecured creditors taxes such as PAYE, VAT and National Insurance which have either been paid to insolvent businesses by their customers or which are being held in respect of their employees.

This will mean HMRC will be repaid ahead of unsecured creditors such as suppliers, pension schemes and trade creditors in corporate insolvency procedures.

And Alexandra Withers, along with many other business finance and insolvency experts, believes this change will have a detrimental effect on an insolvent company’s other creditors and will effectively inflict financial distress on them.

She says: “Given that an insolvent company is unlikely to be able to repay all its debts, the lower a creditor is down the order of payment priority, the less of their money – if anything – they are likely to see back.

“The result of the Treasury being able to muscle its way to the front of the queue in this way is that smaller suppliers, who are usually unsecured creditors, will be likely to receive less through an insolvency process than they do now.”

A survey of R3’s members carried out last year showed that nearly four-in-five (78%) of respondents from the insolvency and restructuring profession feared the proposals would make it harder to rescue businesses, while financial services trade body UK Finance estimated the policy could hit lending by at least £1bn per year even before the coronavirus outbreak.

Alexandra Withers, who is an associate solicitor in the insolvency department of Short Richardson & Forth Solicitors in Newcastle, continues: “Our view is that this short-sighted plan for a quick cash grab for the Treasury will cause long-term damage to the UK’s enterprise and business rescue culture, as well as impeding access to finance for North East firms at a time they need it most.

“It could damage over 15 years’ progress on building an enterprise culture, and comes during one of the most difficult periods facing regional businesses as they face the impact of a global pandemic, as well as the potential disruption of a possible no-deal Brexit.

“The Treasury needs the tax income generated by healthy, thriving businesses, a goal which we agree is important, but the new legislation is likely to result in tighter access to finance for businesses, and will probably lead to more business insolvencies, fewer growing businesses to generate tax receipts and higher redundancy pay-outs for the Government to cover.

“In the midst of such a bleak economic outlook, we are calling on the Government to look at the bigger picture and urgently re-consider introducing this policy.”

Source: BDaily

COFF UP High Street coffee chain Caffè Nero calls in restructuring experts to avoid store closures

CAFFE Nero is the latest high street chain to be forced into restructuring its business after profits were hit by the coronavirus pandemic.

The cafe, which operates 660 sites across the UK, has launched a Company Voluntary Arrangement (CVA) to restructure its business and avoid store closures and job losses.

A CVA is a procedure that allows companies to continue trading while allowing a proportion of its debts to be paid back over time.

The process involves agreeing with its creditors, including the landlords of its stores, ways to cut costs without the whole business going under.

It is "the best rescue tool for a company that is viable going forward but is burdened by historic debt", according to Company Rescue.

Caffe Nero is hoping to keep store closures and any related job losses to a minimum.

It's understood the company will look to redeploy any staff if any stores are forced to close.

Caffè Nero employs about 5,000 people and says it serves 135 million customers annually.

Gerry Ford, Caffè Nero's founder, said the second lockdown in England forced the company to act quickly after profits declined.

The company has suffered losses due to the new measures - including curbs on socialising and the Government's advice for people to work from home.

Mr Ford said: "We have expanded our coffee at home range, launched Click and Collect for the first time via our app and we have begun offering a delivery service through Uber Eats.

"However, with our dine-in facilities now closed for a second time, we have little option but to launch this CVA to safeguard the future of our business.”

The founder added the coffee chain had been trading strongly before the Covid-19 pandemic.

But he explained: "Like so many businesses in the hospitality sector, the pandemic has decimated trading.

"And although we had made significant progress in navigating the financial challenges of the first lockdown, the second lockdown has made it imperative that we take further action."

Mr Ford, who founded Caffè Nero in 1997, has appointed leading accountants KPMG to advise on the CVA.

Will Wright, head of regional restructuring at KPMG, said: "Caffe Nero is an iconic brand on the UK’s high streets with a terrifically loyal customer base.

"However, like many others across the sector, the impact of measures introduced in response to the Covid-19 pandemic has been devastating."

The company hopes to get its finances in order, reduce its rent liabilities and exit loss-making stores.

Source: theSun

UK nightclub owner Deltic Group up for sale as bankruptcy looms

Lack of government help since Covid hit has ‘slowly choked us to death’, says boss Peter Marks

The UK’s largest nightclub operator, Deltic Group, is seeking a buyer as it fights to stave off bankruptcy after the seven-month closure of its venues during the pandemic drained the business of cash.

Its chief executive, Peter Marks, lashed out at the government for failing to offer more support to the nightclub industry, as he confirmed the sale plan.

UK nightclub owner Deltic Group up for sale as bankruptcy looms

Nightclubs are among the very few businesses unable to reopen at all since Covid-19 hit the UK; Marks said the government’s failure to offer more support had “slowly choked us to death”.

In an effort to ensure its survival, Deltic has already cut 1,000 staff – about half its headcount – and has repurposed parts of its clubs as bars, allowing it to reopen 10% of total floor space.

But Marks said this was bringing in £80,000 a month, compared with the £1m that the company is burning through, leaving it facing running out of cash by December.

Marks said he was looking at every option to secure the survival of the business, which runs 53 clubs, including Pryzm in Birmingham and Eden in Newcastle and Manchester.

The options could include a company voluntary arrangement (CVA) – a form of insolvency that typically involves site closures and an agreement from creditors to cut rents or fees.

But Marks, who told the Guardian in August that the company could not survive without more state support, said he was also exploring a sale.

“We have to look at every option going and part of that is to see what other capital is out there to get the business through this,” he told the Financial Times, which first reported the story.

Michael Kill, chief executive of trade body the Night Time Industries Association, said: “As the weeks and days go on we’re going to see more and more of this happening.

“People within the business will be concerned about their future and it epitomises the concern in our sector, whose businesses have been restricted for a long time without considered and proportionate support.

“For many companies, we’ve missed the boat. Now we’re starting to lose businesses and the government needs to act at pace to stem this loss.

“Our night-time economy will slip away if we’re not careful.”

Source: The Guardian

KPMG puts UK restructuring unit up for sale

KPMG has put its UK restructuring practice up for sale and held talks with private equity firms ahead of a possible auction before the end of the year, according to people familiar with the matter.

A cash injection would help the Big Four firm, with its finances having suffered during the pandemic. KPMG also faces a potentially large fine over its audit work for Carillion, the collapsed outsourcing group, as well as a £250m negligence lawsuit brought by the company’s administrators.

Two people close to the restructuring practice said KPMG had spoken to interested buyers in recent weeks. One person said the firm had hired Melanie Richards, formerly deputy chair of KPMG who retired in September, to lead a sale process.

KPMG said: “We can confirm we are exploring options for our restructuring business. However, we have made no decisions over any eventual outcomes at this stage and will not comment further at this time.”

A person with direct knowledge of the situation described several discussions between senior KPMG partners and private equity firms in recent weeks. The person said the firm was “speaking to different players ahead of an auction”.

A second person, who works at a private equity firm, said his firm was aware of a sale process.

A third person close to KPMG said the “decision to sell [restructuring] was taken weeks ago”.

However, KPMG added: “We have not spoken to PE houses or their advisers in relation to this matter.”*

Restructuring is a significant fee-earning operation at KPMG. The practice has recently advised on the insolvency of travel operator Thomas Cook and at Intu Properties. It has 22 partners and 475 staff.

The plans come two years after KPMG rejected interest from buyout firm Permira in acquiring its restructuring division. A number of the unit’s senior partners, including Mark Raddan, global head of turnround, and Blair Nimmo, UK head of restructuring, have been part of plans to move the division outside KPMG since the Permira approach, two people close to the matter said.

A sale would end conflicts of interest that have made it increasingly difficult for KPMG’s restructuring partners to take on new clients.

Rival firm Deloitte put its restructuring practice up for sale last month following concerns among its senior executives that it had become too difficult to manage conflicts of interest. However, the plans were swiftly vetoed by the firm’s global business, which said a sale could have an adverse impact on the rest of the group.

The Big Four accounting firms have come under growing pressure to manage conflicts of interest after a series of corporate failures and accounting scandals called into question the quality of their audits and the independence of their advice.

Last year the Financial Reporting Council, which supervises the audit profession, introduced a “radical” update to its ethical standards for audit firms. It tightened the rules on what services the industry could provide to listed companies and financial institutions in an effort to strengthen auditor independence.

Source: Financial Times

Personal and corporate insolvencies begin to climb

Company insolvencies increased by 19% in September compared to August, while bankruptcies and debt relief orders (DROs) also began a substantial rise.

There were 926 company insolvencies in September, compared to 778 in August. This was comprised of 742 creditors’ voluntary liquidations (CVLs), 44 compulsory liquidations, 109 administrations and 31 company voluntary arrangements (CVAs).

Individual insolvencies

There were 1,527 debt relief orders (DROs) and 1,036 bankruptcies in September 2020. This is a 14% and 34% increase on August, respectively. The bankruptcies figure was comprised of 963 debtor applications and 73 creditor petitions.

Using a three-month rolling average in each of the three months ending September 2020, the Insolvency Service revealed there were 4,639 individual voluntary arrangements. This is five percent lower than the rolling three-month average to the end of August, and 38% lower than September 2019.

Colin Haig, president of insolvency and restructuring trade body, R3, said: “These results show that the toll of the Covid-19 pandemic is taking on businesses and consumers may be starting to be felt in the official insolvency numbers, but the government’s support measures have reduced the size and scale of the initial impact.

“Despite the increases, today’s figures are still lower than pre-lockdown levels of insolvency and don’t fully reflect the health of businesses and the economy in the way they would normally.”

Source : CreditStrategy

Edinburgh Woollen Mill on the brink of insolvency with 24,000 jobs at risk

The high street fashion chain, which owns Jaeger and Peacocks, said there ‘will inevitably be significant cuts and closures’.

High street fashion chain Edinburgh Woollen Mill (EWM), which owns Peacocks and Jaeger, is close to collapse, with 24,000 jobs in the balance, according to documents filed with the High Court.

The company has lodged a notice of intention to appoint administrators to look for potential buyers to shore up the struggling business.

Bosses wrote to staff on Friday morning, warning them that the national and local lockdowns had hit sales very heavily.

The company added that it has been hit hard by allegations, which it denies, that the retailer and several rivals failed to pay some Bangladeshi suppliers during lockdown in an attempt to cut costs for clothes they were unlikely to sell.

The move by EWM, owned by businessman Philip Day, will see insolvency specialists at FRP spend 10 days carrying out an urgent review ahead of further action.

All stores will continue trading and further details will be announced in due course, the company added, but significant changes are expected.

EWM chief executive Steve Simpson said: “Like every retailer, we have found the past seven months extremely difficult.

“This situation has grown worse in recent weeks as we have had to deal with a series of false rumours about our payments and trading which have impacted our credit insurance.

“Traditionally, EWM has always traded with strong cash reserves and a conservative balance sheet, but these stories, the reduction in credit insurance, against the backdrop of the lockdown and now this second wave of Covid-19, and all the local lockdowns, have made normal trading impossible.

“As directors we have a duty to the business, our staff, our customers and our creditors to find the very best solution in this brutal environment.

“So we have applied to court today for a short breathing space to assess our options before moving to appoint administrators.

“Through this process I hope and believe we will be able to secure the best future for our businesses, but there will inevitably be significant cuts and closures as we work our way through this.

“I would like to thank all our staff for their amazing efforts during this time and also our customers who have remained so loyal and committed to our brands.”

An FRP spokesman said: “Our team is working with the directors of a number of the Edinburgh Woollen Mill Group subsidiaries to explore all options for the future of its retail brands Edinburgh Woollen Mill, Jaeger, Ponden Home, and Peacocks.”

The move came just hours before Chancellor Rishi Sunak was expected to unveil new plans for protecting jobs and businesses hit by the second wave and new measures.

Source: Express & Star

Regus’ Insolvency Threat, Hygge Cancels Expansion Plans, And More

IWG Set to Place Regus into Insolvency

Following news that it had filed for Chapter 11 bankruptcy for some of Regus’ US affiliates, International Workplace Group (IWG) recently announced that it plans to file for insolvency for Regus in the hopes of getting IWG “off the hook for £790m of lease agreements, spread across 500 properties.” A statement from the company argued that “IWG resorted to insolvency measures because the COVID-19 pandemic is a black swan event and it has severely impacted business and presented it with unforeseen challenges.”

Hygge Reverses Expansion Plans

Coworking space operator, Hygge, had plans to add square footage to its workspace portfolio this year. However, the COVID-19 pandemic has altered those plans. Bizjournals reported this week that “the pandemic has forced Hygge to end its lease for a 21,000-square-foot expansion at its flagship West Hill Street location.” The coworking operator had signed the lease before the pandemic hit, however due to pandemic, the coworking space lost half of its members and over $10,00 in monthly memberships. Ending the lease, according to Hygge’s founder, “was the right decision to protect the business moving ahead” as it will provide the company with a little more runway to weather the storm.

New WFT Orders a “Devastating Blow” to UK’s Flexible Workspace Industry

Last week, The UK government advised people in  England to go back to working from home in hopes of reducing the UK’s rise in COVID-19 cases. According to Jane Sartin, Executive Director of FlexSA, the statement “was a devastating blow to the flexible workspace industry” arguing that recent early signs of new clients have “immediately ceased” following the announcement. Furthermore, flexible workspace operators in the UK are concerned about the long-term financial impact on their businesses, especially considering that  many had already made huge investments in safety measures in order to welcome workers back into their spaces.

Source :

Business Financial Distress UK

Government gives businesses much-needed breathing space with extension of insolvency measures

Measures from the Corporate Insolvency and Governance Act extended to relieve pressure on businesses dealing with coronavirus.

Measures put in place to protect businesses from insolvency will be extended to continue giving them much-needed breathing space during the coronavirus (COVID-19) pandemic, the government announced today (24 September).

A raft of changes to protect businesses from insolvency were introduced in the Corporate Insolvency and Governance Act and were due to expire on 30 September 2020. The temporary measures include:

  • companies and other qualifying bodies with obligations to hold AGMs will continue to have the flexibility to hold these meetings virtually until 30 December 2020. This means that shareholders can continue to examine company papers and vote on important issues remotely
  • statutory demands and winding-up petitions will continue to be restricted until 31 December 2020 to protect companies from aggressive creditor enforcement action as a result of coronavirus related debts
  • termination clauses are still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process. However, small suppliers will remain exempted from the obligation to supply until 30 March 2021 so that they can to protect their business if necessary
  • the modifications to the new moratorium procedure, which relax the entry requirements to it, will also be extended until 30 March 2021. A company may enter into a moratorium if they have been subject to an insolvency procedure in the previous 12 months. Measures will also ease access for companies subject to a winding up petition. The temporary moratorium rules will also be extended to 30 March 2021

Business Minister Lord Callanan said:

It is vital that we continue to deliver certainty to businesses through this challenging time, which is why we are now extending these important and necessary measures to protect companies from insolvency.

Through this measure, we want to ensure businesses are able to not only come through this testing period, but also to plan, adapt and build back better.

Additional information

  • businesses will be protected from the threat of eviction until the end of year following an extension to the commercial eviction ban announced on 16 September 2020
  • this extension will protect businesses that are struggling to pay their rent due to the impact of COVID-19 from being evicted and help the thousands of people working in these sectors feel more secure about their jobs
  • the government is clear that where businesses can pay their rent, they should do so, as this support is aimed at those struggling the most during the pandemic. This is set out in the Code of Practice which was published in June.