Author: Ben Ashworth

After months of speculation and downturn in sales performance in over the Christmas / New Year Period, computer video game retailer, GAME Group, has gone into Administration, with Mike Jervis and Stuart Maddison both of PricewaterhouseCoopers (PwC) appointed as Administrators.

It is understood that the move into Administration, will result in the immediate closure of 277 of GAME Group’s 609 stores in the UK and Ireland. It is unclear at this stage how the Group’s operations across Continental Europe (where it boasts a further 678 stores) will be affected. On the personnel side, it is anticipated that the store closures in the UK and Ireland will result in an excess of 2,000 employees being made redundant this week.

The causes of GAME Group’s move into Administration are multifaceted. As demonstrated by the geographic coverage of its operation, GAME Group had pursued an ambitious, fast paced international expansion, which in turn generated high fixed costs and stretched working capital arrangements. Poor trading over the 2011/12 period and the industry-wide factor of profits being undercut by online retailers, meant that such overheads and working capital arrangement became unsustainable. When suppliers, notably EA Sports stopped supplying its top / newest titles to GAME and with the Group’s shares being suspended on the London Stock Exchange last week, the slide into Administration became inevitable.

The Administrators are reported as wanting to sell GAME as a going concern, believing the business to retain value and on the basis that despite the seeming exodus to online retailing, “there is room for a specialist game retailer in the territories in which [GAME] operates,” (Matt Jervis). Private Equity House, OpCapita, has been touted as a possible buyer. The Landlords of those GAME stores that will remain open however will need to be wary, as recent administrations in the retail sector, have lead to widespread concerns over aggressive negotiating tactics from buyers seeking rent free periods and rent reductions.

Ben Ashworth is a Commercial Dispute Resolution Solicitor specialising in Debt Recovery.

Author: Ben Ashworth

Some big headlines are being made this week in the arena of Football Finances and Insolvency. Yesterday, Old Firm giant Rangers confirmed that they had taken steps to appoint administrators.

The problems appear to have evolved over a disputed tax bill, in so far that the club is awaiting a tax tribunal decision which could result in liabilities and penalties exceeding £50m, which, Rangers said it cannot pay.

The case relates to the use of employment benefit trusts (EBTs) to pay players, which HMRC argue Rangers have misused to avoid paying tax. HMRC have stated that they will appeal the decision if it goes against them, leaving Rangers exposed to prolonged financial uncertainty.

Chairman Craig Whyte also points to inherent problems with the financial structure at Rangers as a further reason to call in Administrators. He has stated that the move to administration is “the most practical way to safeguard the long-term future of the club is to go through a formal restructuring process”.

With the threat of a HMRC winding-up petition, Rangers will likely seek the protection of a moratorium against such action through entry into a Company Voluntary Arrangement (CVA) with its  creditors. It has also emerged that Criag Whyte is the club’s main secured creditor, by which, he could look to secure Rangers’ future by entering the Company by which the club is incorporated into  a pre-pack administration to satisfy the clubs debts to him personally. Either way however a move into administration is likely to  lead to extensive cost-cutting with potential job loss.

This is a big development in the world of football insolvency where the icy chill of taxation continues to blow. With Portsmouth also taking steps to enter administration yesterday and the thorny issue of the Football Creditor Rule (where uniquely, debts owed as transfer fees and player wages are paid in priority to other creditors) still subject to court action, Football’s Finances could be said to have never been so turbulent. Click here to read more.

Ben Ashworth is a Commercial Dispute Resolution Solicitor specialising in Debt Recovery.

Author: Ben Ashworth

It would seem that even being a supplier to the London 2012 Olympics is not enough to stem the trading difficulties besetting the construction industry.

Parry Bowen, a Staffordshire based business specialising in high quality, state-of-the-art glass facades, had won the contract to fit curtain walling and glazing at the London 2012 Olympics’ Stratford base. Due to the anaemic condition of the construction market however, Parry Bowen now look set to enter administration next week with Irwin & Company appointed as administrators.

The loss of such a high-profile supplier will be unwelcome for the organisers of London 2012, for whom a seeming unrelenting run of bad-news stories over costs, logistics, image and legacy have already served to tarnish The Games, perhaps irreparably.

Those in the construction industry will also be shaken by this news, for Parry Bowen was far from a failing business. It is reported how only two years ago, the business had substantial cash reserves, which have now been eaten away by the significant drop off in trade and the inability of its customers to pay. Through their involvement in projects such as Salford Quays and the Emirates Stadium, Parry Bowen enjoyed a unique reputation in its industry and was widely credited for its innovation in glazing and technical expertise.

If trading from such a position of strength still cannot guarantee survival in the Construction Industry in these turbulent times, the question now on the lips of its participants is what can?

Ben Ashworth is a Commercial Dispute Resolution Solicitor specialising in Debt Recovery.

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Author: Ben Ashworth

Following the recent decision in Paymex Ltd v Revenue & Customs, European Law has again shown its potential to cause complications for Insolvency Practitioners (IPs) engaged in Individual Voluntary Arrangements (IVAs).

Commonly, where an individual comes to an arrangement with their creditors by entry into an IVA, a Supervisor is appointed to collect income contributions from the individual and make payment to creditors. The Supervisor is of course, entitled to charge a fee of this, but following Paymex,  there is now real doubt as to whether VAT can be charged on the same.

In Paymex, The First Tier Tax Tribunal held that the services of an IP in respect of an IVA, including both the nominee and supervisory stages, constitute a single exempt supply for VAT purposes, under Article 135(1) (d) of Council Directive (EC) 2006/112/EC (the “Directive”).

The article explains that Member States shall be exempt from VAT in transactions concerning: negotiations about debt and payments, transfers, cheques and other negotiable instruments (i.e., payment handling). The decision in Paymex found that payment handling was the main duty of an IP in performing a supervisory role in an IVA. As such, The First Tier Tax Tribunal held that such services are exempt from VAT pursuant to Article 135(1) (d) of the Directive.

As a consequence of Paymex, IPs can expect individuals subject to an IVA, to argue strongly for a refund of VAT payments made in respect of Supervisor’ fees. Some comfort may however be had, by The HMRC’s brief, which confirms it will not be challenging the Paymex decision and by that, invites IP’s to make claims for any overpayment of VAT, in respect to the provision of supervisory services in an IVA.

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For further information about our Litigation and Dispute Resolution services or to discuss a particular matter or situation in more detail, contact Ben Ashworth at our St Albans office by email at ben.ashworth@salaw.com or on 01727 798058.

© SA LAW 2011

Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them. You are recommended to obtain specific advice in respect of individual cases.

Author: Ben Ashworth

For 12,000 holiday makers travelling with Holidays 4 U, the summer get-away has became a nightmare.
Holidays 4 U (also trading as Aegean Flights), that had specialised in selling packages and flights to Turkey, has been placed into administration.
Holidays 4 U employed 18 staff, all of whom will now be made redundant in the course of the administration. As for the holiday makers, the Civil Aviation Authority (CAA) will (as in a now all too established operation) be responsible for returning passengers who had booked flights as part of a package holiday with Holidays 4 U. Those passengers, together with those who have booked to travel with Holidays 4 U in the future, can also apply to be reimbursed out of  CAA’s Air Travel Organisers’ Licensing Scheme (“ATOL”).
Following on from the collapse of Dream Holidays just last month, the loss of Holidays 4 U underlines the fragile state of the package holiday industry, which has very much become a headline victim to the lack of consumer spending and confidence in the UK economy.
In recent times, Holidays 4 U boasted an annual turnover of £35million. The fact that it has entered into administration from that position of strength, can only add to the concerns of all package tour operators that in the current economic climate, no-one is safe.

Author: Ben Ashworth

The BBC has today published statistics (confirmed on the Insolvency Service Website) showing that in 2010, the number personal insolvencies in England & Wales rose to an all-time high of 135,089. At face value, these statistics would appear to totally confound the view that the U.K economy has turned a corner and is on the road to (albeit fragile) recovery.

Yet from closer examination, do the figures necessarily paint a picture of doom and gloom? For example, whilst 59,194 individuals were made subject to bankruptcy orders in 2010 (the insolvency measure which is by far the most onerous on an individual), this actually represents a fall of a 20.7% on the 74,670 bankruptcy orders made in 2009. Indeed, the number of bankruptcy orders granted 2010 was the lowest since 2005. 

Rather, it is the exponential growth in the number of Individual Voluntary Arrangements (IVAs) and Debt Relief Orders (DROs) entered into in recent years that has caused the number of personal insolvencies to swell. Some commentators point to this rise as indicative of the general economic decline in the U.K. The alternate view however, are that IVAs and DROs now enable creditors to tackle debts which previously, would not have been economically viable due to restrictive costs of obtaining a bankruptcy order. Hence the introduction of IVAs and DROs made a rise in personal insolvencies inevitable.

In the experience of many insolvency practitioners and legal advisors however, deconstruction of the statistics brings only partial comfort. With the seemingly unabated rises in the costs of living, continuing reluctance by banks to engage in commercial lending and inflation not being matched by wage growth, many more individuals are now living in the shadow of insolvency, with persons  on low incomes, exposed to distressed companies (in the form of personal guarantees) or possessing tax / utility bill arrears being particularly at risk.

On balance therefore, whilst an analysis of the statistics suggest not a lot has changed in terms of the trends within the numbers of personal insolvencies, the fact that the numbers keep growing, is a clear indictment that the financial prospects for many will for the foreseeable future, remain highly challenging.

Author: Ben Ashworth

The rise in VAT to 20% is bad news for U.K. businesses struggling to discharge their annual tax burden. Leading accountancy practices predict that the VAT increase will place an intolerable strain on the working capital of such businesses; resulting in the insolvency of some and the bid to avoid the same fate, the attempt by many more to enter a ‘Time to Pay Scheme’ (“TTPS”) with HM Revenue & Customs (“HMRC”).

But despite the hype, are TTPSs really the key to business recovery they purport to be, or do they merely allow unviable companies to trade on, whilst storing up trouble for a later day?

To read the full article on the SA Law website, click here.