Demand for debt advice likely to increase

Anyone who has needed to see a debt advice professional over recent years will know how much more difficult this has become due to the soaring demand for these services from the many consumers who are struggling with their finances and finding it difficult to repay their debts. Many have had to wait for long periods of time in order to get an appointment with a debt counsellor to discuss debt problems and issues.

There are now fears that the situation could actually get worse with the demand for debt advice rising as a result of government cutbacks amongst other things. The austerity drive that was announced by the government last year and is due to be imposed over the course of this year and next year will have a profound impact on the finances of many people, such as those who see their benefits cut or those that will see their jobs go due to cutbacks in the public sector, which can then have a knock on effect in the private sector.

However, officials have said that it is not only the austerity drive in the UK that will drive people into worse financial situations but the similar situations that are going on around the world, which has a knock on effect on the UK. Some even think that the UK could be in line for another recession, which would bring dire news for businesses and consumers alike.

One official spoke about the cutbacks and economic situation in the UK and in other countries, stating: “At the moment it just seems to be a worldwide trend. I think the inevitable consequences of that is it is going to be a difficult period ahead, not just for the UK but for much of the world.”

Tags: Financial Services, knock on effect, debt advice, financial planning, economic situation, consumers, appointment, fears

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Demand for more protection against phoenix companies

A recent survey of SMEs has highlighted the controversy surrounding insolvency law, with 96 per cent of those questioned saying they thought insolvent firms should not be allowed to launch similar companies. 

Carried out by the debt collection agency, Daniels Silverman, the survey demonstrates the concern felt by SMEs over the practice of pre-pack administrations – often dubbed as ‘phoenixing’ and seen as a method whereby insolvent firms ‘dump their debt’.

Commenting on the findings, Carole Hughes, managing director at Daniels Silverman, said: “Our survey results indicate that many SMEs would like a rethink in insolvency law to protect companies from unscrupulous directors that take advantage of pre-pack administration.

“They have told us they are becoming more and more frustrated by directors avoiding their debts by going through a pre-pack administration to form a new company from the remains of a failed company.”

Beverley Budsworth, Managing Director of The Business Debt Advisor, commented:”Buying back or restarting a failed business is a tough decision, and all too often new companies, set up out of the ashes of failed companies themselves, fail as they have been underfunded from day one.

“However, there are many success stories and I don’t think we should have an insolvency regime which makes it impossible for owners to buy back the business.”

Paralleled by rising insolvency levels in general, the number of phoenix companies has also increased, frequently generating a ‘business as normal’ impression and hiding the extent of insolvent companies.

Critics of pre-pack administrations claim that customers are misled by new ‘phoenix’ companies, as they operate under a similar name to their predecessor which could lead the customer to believe it was the older, more established company.

According to Daniels Silverman, many of the SMEs surveyed said they believed that creditors lending to these insolvent companies need further protection under the insolvency law. Although the insolvency law does provide some degree of protection, using a completely different name is not outlawed.

Highlighting the plight of the creditors, Hughes said: “It is very hard for a creditor to see an insolvent company trading ‘as usual’ often from the same premises, under the same director and with the same offering, while they are left significantly out of pocket because the money owing to them has been written off.”

Tony Costigan, Managing Director of Pheonix Company Consultants, specialises in company recoveries through pre-pack deals. He said: “In most cases the directors have personally lost substantial sums of money as they have continued to support the failing company way beyond their own financial means.”

In addition, he explained that allowing a company to re-start under a new name means that countless jobs, which would otherwise have been lost, are saved.

So whilst many SMEs voice their resounding dissatisfaction at phoenixing companies and insufficient insolvency laws, in fact, most are just calling for the smaller number of companies who exploit the system to be monitored.

Carole Hughes added: “While there are legitimate reasons for many pre-pack administrations we would call for a look at the number of unscrupulous directors who are exploiting the process to avoid paying their debts and profit from pre-pack administrations.”

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Posted in: against,Companies,Demand,phoenix,protection

Demand for more protection against phoenix companies

A recent survey of SMEs has highlighted the controversy surrounding insolvency law, with 96 per cent of those questioned saying they thought insolvent firms should not be allowed to launch similar companies. 

Carried out by the debt collection agency, Daniels Silverman, the survey demonstrates the concern felt by SMEs over the practice of pre-pack administrations – often dubbed as ‘phoenixing’ and seen as a method whereby insolvent firms ‘dump their debt’.

Commenting on the findings, Carole Hughes, managing director at Daniels Silverman, said: “Our survey results indicate that many SMEs would like a rethink in insolvency law to protect companies from unscrupulous directors that take advantage of pre-pack administration.

“They have told us they are becoming more and more frustrated by directors avoiding their debts by going through a pre-pack administration to form a new company from the remains of a failed company.”

Beverley Budsworth, Managing Director of The Business Debt Advisor, commented:”Buying back or restarting a failed business is a tough decision, and all too often new companies, set up out of the ashes of failed companies themselves, fail as they have been underfunded from day one.

“However, there are many success stories and I don’t think we should have an insolvency regime which makes it impossible for owners to buy back the business.”

Paralleled by rising insolvency levels in general, the number of phoenix companies has also increased, frequently generating a ‘business as normal’ impression and hiding the extent of insolvent companies.

Critics of pre-pack administrations claim that customers are misled by new ‘phoenix’ companies, as they operate under a similar name to their predecessor which could lead the customer to believe it was the older, more established company.

According to Daniels Silverman, many of the SMEs surveyed said they believed that creditors lending to these insolvent companies need further protection under the insolvency law. Although the insolvency law does provide some degree of protection, using a completely different name is not outlawed.

Highlighting the plight of the creditors, Hughes said: “It is very hard for a creditor to see an insolvent company trading ‘as usual’ often from the same premises, under the same director and with the same offering, while they are left significantly out of pocket because the money owing to them has been written off.”

Tony Costigan, Managing Director of Pheonix Company Consultants, specialises in company recoveries through pre-pack deals. He said: “In most cases the directors have personally lost substantial sums of money as they have continued to support the failing company way beyond their own financial means.”

In addition, he explained that allowing a company to re-start under a new name means that countless jobs, which would otherwise have been lost, are saved.

So whilst many SMEs voice their resounding dissatisfaction at phoenixing companies and insufficient insolvency laws, in fact, most are just calling for the smaller number of companies who exploit the system to be monitored.

Carole Hughes added: “While there are legitimate reasons for many pre-pack administrations we would call for a look at the number of unscrupulous directors who are exploiting the process to avoid paying their debts and profit from pre-pack administrations.”

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Posted in: against,Companies,Demand,phoenix,protection