Insolvency March 27, 2015
On March 20, 2015 government’s response to the independent review of MAS (Money Advice Service) headed by Christine Farnish. On the same day the review was published as well. The FCA, Financial Conduct Authority and MAS also gave their response to the independent review.
Christine Farnish Appointed Head of Independent Review
Government established MAS to ensure access to financial advice and education to consumers. Last year, May of 2014, Christine Farnish was appointed to lead the independent review of the Money Advice Service.
In their responses, the government, the FCA and MAS established what they will do to meet recommendations and challenges identified in the review. It is also their aim to improve how those objectives are met by MAS.
Findings of Review
In relation to debt advice, the review found that significant progress was made by MAS since 2012. Further, the recommendation of the review that MAS should continue to provide excellent quality advice on debt to consumers was well received by government. MAS is dedicated to the creation of a Debt Advice Steering Group which will back the MAS’ efforts to abide by the review’s recommendations which include giving assistance to consumers so that they can receive advice through the means that is best suited to their needs.
Government was equally pleased with commitments from the water and energy sectors to provide £1 million during the coming financial year for debt advice funded by the Money Advice Service. This is a vital step towards a more sustainable funding platform for debt advice that is more sustainable and equitable.
Recommendations Going Forward
In regards to money advice, it was recommended by the review that MAS should close market gaps to circumvent the duplication of those services already in place by other financial advice and education providers. This objective is supported by government, and also welcomed the FCA and MAS’ commitment to work together to implement many of the review’s recommendations.
The two groups are committed to working in unison to answer questions brought up by the review in terms of the Money Advice Service’s current delivery models and their focus. It is their intent to submit and publish plans of action for submission to government this coming autumn.
Government Will Review Recommendations Again in Autumn
After the recommendations are submitted, government will decide if any other changes to the advice service need to be put in place, and whether or not any changes in legislation are needed. Their findings will be published before year’s end. Potential alterations would need to be in the context of plans going forward as well as in any new developments within the financial advice and information sector. Included in their findings will be how government’s changes in pensions affected the sector.
In response to the final report of the independent review, Andrea Leadsom, Economic Secretary states that a key part of government’s long term plan is ensuring consumers have access to first-rate advice and education.
Secretary Leadsom further says that she is happy to announce that the final report and government’s response to the independent review have been published.
In her words, she is “grateful to Christine for her work in leading this review” which she states makes several recommendations that are important for improving the manner in which the Money Advice Service is run. She further welcomes the steps announced by MAS along with the group’s commitment to consider in full recommendations made by the review and their agreement to submit a prospective plan of action in the autumn.
Farnish states that the Money Advice Service needs to revamp its business model. If they follow her recommendations, consumers will better have the ability to comprehend and work through the financial services markets that are highly complex.
Rather than to compete in a market that is already over-crowded, the Money Advice service should work for consumers to strengthen the accessibility and supply of financial guidance and information. The independent review details how these benefits to consumers could be realized with greater accountability and a much reduced cost.
This challenges MAS but also provides an opportunity that is possible to achieve. Christine Farnish believes that the result will be better service to consumers.
Insolvency March 24, 2015
On 12 Feb. 2015, the director of the insolvent company St. Vincent Street (SVS) Ltd., Thomas Coakley (age 54), signed a 7-year disqualification undertaking, which banned him from acting as a company director of any limited company until Feb. 2022.
A month earlier, on Jan. 14 2015, his son Ronald Andrew Coakley (age 28) also signed a shorter 3-and-a-half year disqualification undertaking, which banned him from acting as a director of any limited company until July 2018.
SVS entered into administration on 14 Feb 2013 after trading between the months of April 2010 to February 2013. The company was originally incorporated on 2 Nov. 2009. At the time of entering into administration, SVS had a total of £21,741,506 in liabilities and possessed a total of £9,126,015 in assets, the difference between which resulted in estimated deficiency of £12,615,491 owed to creditors.
Falsified Employment Records
SVS was a property company that failed to fulfil the legal obligation to protect the deposits of tenants. Furthermore, it was found that the company paid staff in gross while stating otherwise on their employment contracts. In particular, an investigation conducted by the Insolvency Service revealed that SVS did not accurately and properly account for tax through the time it was trading.
An examination of the company’s employment contracts showed that SVS should have been paying employee tax according to the PAYE system, but only one of their employees was registered in the scheme. An audit of the company’s accounts showed that employees were paid in excess of £500,000 overall. Meanwhile, all deductions, declarations, and PAYE/NIC payments to HMRC totalled less than £10,000. In addition, while the directors of SVS operated directors’ loan accounts, they failed to account the corporation tax to HMRC.
Failure to Account for Tenant Deposits
The sum of the tenant deposits that SVS failed to protect totalled to £19,425, an although the company could not preserve these deposits, before ceasing to trade SVS cleared out its bank account of all funds by making payments totalling more than £26,000 to a family member.
Insolvency Service Speaks Out
Cheryl Lambert, the Head of Outsourced Investigations at The Insolvency Service, commented on the disqualification of the directors of SVS, stating that the Insolvency Service will continue to “protect the integrity of the marketplace” in situations where the directors of property companies fail to comply with their obligations protect tenant deposits and properly pay tax. In such cases, Cheryl says, directors who breach fiduciary duties “can expect the Insolvency Service to seek a ban.”
Cheryl concluded her comments saying that Thomas Coakley operated the business like it was “a personal fiefdom” and continuously put his own interests before that of his company’s creditors and tenants, as well as the common taxpayer.
Thomas Coakley’s signed undertaking was given to the Secretary of State for Business Innovation & Skills in February; his disqualification commenced on 5 Mar. 2015. His son, Ronald Coakley, gave his signed undertaking in January, but his disqualification is set to commence on 2 Apr. 2015.Read more
According to word coming from Clinton Cards, the company may be headed towards administration which could potentially place the jobs of more than 8,000 people at risk.Read more
Financial solutions company Think Money has welcomed new plans, announced by the Government, to ‘streamline’ the bankruptcy process – which could cut costs for both struggling borrowers and the taxpayer.
Business Minister Edward Davey has made proposals to allow struggling borrowers to apply for a bankruptcy order without going through the courts, which could help vulnerable people get the help they need with their debt problems faster.
Under the proposals, people applying for bankruptcy would be able to make an online application – or use a traditional paper application form – but would only have to attend court if there was a disagreement between them and their lenders.Read more
Insolvency November 14, 2011
It seems as though the debt crisis in the eurozone has far reaching tentacles that have impacted everyone from individuals to corporations to governments around the world. After bad investments in the eurozone debt crisis, MF Global filed bankruptcy and liquidators are now winding down the multinational brokerage.Read more
At the height of the debt crisis which peaked in 2009, the North East of England saw a record number of insolvent businesses being taken over by investors. Recently R3 commissioned Experian Corpfin to research insolvent company takeovers and those still distressed. Findings show that far fewer insolvent businesses are being taken over in the North East.Read more
Record amounts of people were proclaimed insolvent in England and Wales during the past year.
An all-time high of 135,089 persons were announced insolvent in 2010, the Insolvency Service revealed – 0.7% up on the total for 2009.
The record had been reached in spite of a 13.6% drop year-on-year in individual insolvencies to 30,729 for the last three months of the year, as the improving economic situation began to take hold.
The figures stick to a warning that figures plunged directly into insolvency this year is only going to increase to new records as young families are struck by the Government’s austerity push.
Around 140,000 adults will probably be made bankrupt, or forced straight into another kind of personal insolvency, equal to 385 per day, said accountancy firm RSM Tenon.
Mark Sands, of RSM Tenon, stated: ‘The UK will see the highest levels of personal insolvencies on record as the Government’s austerity measures start to bite.
‘The number of victims will be enough to fill both the London 2012 Olympic stadium and the Emirates Stadium [home to Arsenal football club].’Read more
Insolvency practitioners could be banned from getting appointed as administrators of companies where they have served as restructuring advisers.
An Office of Fair Trading inquiry is thought to be taking a look at a revolutionary new rule that could mean any insolvency specialist who advised a seriously indebted firm or even its lenders could not go on to deal with a subsequent insolvency.
This may be made to stop supposed conflicts of interests under which insolvency practitioners, asked to review a troubled business, recommend administration and then later get the often lucrative work involved.
R3, the insolvency practitioners’ trade body, is thought to oppose this kind of ban, believing that the practitioner which reviewed the company may be best placed to deal with virtually any subsequent administration.
The OFT may possibly also demand an independent regulator for insolvency professionals, just like the new Solicitors Regulation Authority.Read more
It’s unacceptable to hit women, yet the recession seems to have got away with it. According to startling statistics published by the Insolvency Service, women across the UK have struggled with the economic downturn more than their male counterparts.
Figures show that over a period of 12 months, a staggering 65,000 women were deemed insolvent because of unmanageable debts. That works out at 175 cases a day.
Compared with the previous year, the number of women being declared insolvent increased by 22% in the 12 months to 31st August. At the same time, the number of men being declared insolvent because of their debts increased by 8% to 75,111.
Effectively, this means the crisis among women is ballooning nearly three times faster than it is for men, according to research based on official figures from the Government’s Insolvency Service.
Experts warn women are paying the price for trying to maintain a standard of living they simply cannot afford.
A spokesperson commented: “The rise in the number of people being declared insolvent points to several things. For example, it suggests that more people are struggling with their debts – but also that those already struggling with their debts are becoming more aware of their options.
“The figures are clearly on the rise, and there are still many borrowers struggling with their debts without getting help.”
Reports also indicated that more than a million women in Britain are unemployed, according to official figures from the Office for National Statistics.
This is the highest for 17 years, with the number expected to keep rising as the impact of this week’s spending review takes effect.