ICSM Retail Insolvency News: reasons why shops are closing are well known - but there is one elephant in the room nobody mentions that causes their demise - plus a list of latest casualties

Pic: Oxford Street Debenhams shut. The Independent.

ICSM Retail Insolvency News: reasons why shops are closing are well known - but there is one elephant in the room nobody mentions that causes their demise - plus a list of latest casualties

With a further 200,000 retail jobs likely to go this year 2021 is for retail even worse than last year. A combination of high costs such as rent and rates, online competition squeezing profits, a lack of preparation for future trends speeded up by Covid-19 effects, a general downturn in the High Street and Brexit that has seen some price rises and commodity shortages.

Ian Carrotte of ICSM said there’s the elephant in the room that is usually overlooked: debt. He said: “Smaller retailers and small high street businesses have around £2.3 billion in debt. Debt eats into profits and if it grows will eventually lead to the end of the enterprise. Many smaller outfits that didn’t qualify furlough payments or loans due to the way they were structured and have run up huge debts in order to stay in business. Debt destroyed Debenhams and countless other stores. When a retailer looks to a big bank loan to keep trading things have already gone wrong. Loans should be for expansion and acquisition and never just to keep trading and to stand still.”

Gap closed all their 81 stores last month with the loss of more than 1,000 jobs in the UK and Ireland, while John Lewis have shuttered 18 of their stores making another 1,000 people out of work. Shutting shops due to covid has decimated the sector. As Ian Carrotte said if you take away the customers from a business then it is unviable – which is what has happened.

The question is now who will be next? When the furlough system ends in the autumn many businesses will go to the wall. And with the current climate of private equity groups buying up supermarket chains then expect some store closures as they off load unprofitable units. If Liberty Steel does collapse then retailers near to those sites in Wales and the Midlands could have their custom taken away while in the High Street there are plenty more potential insolvencies. The public’s taste for online purchases has seen many traditional shops go from clothing to art materials and from books to computer parts. When the slump comes to an end is hard to predict as Covid has changed shopping habits for good.

 

These are some recent casualties in retailing and allied industries:

RETAIL, WHOLESALE AND ALLIED INDUSTRIES
Administrators Appointed
Clement Browne Limited    07184480
 
Compulsory Liquidators Appointed s 136
Your Car Solutions Limited    10398386
 
Creditors’ Voluntary Liquidation Deemed in Consent Meetings
Akal Nation Limited    10864888
Clapham Wine Company Limited    08074846
Easylinks Trading Limited    03158627
Queen B Cosmetics Limited    11548852
Red Salons Limited    07946145
Romford Balti Limited    11574753
VF Foods (UK) Limited    09202578
 
Liquidators Appointed
Amcam Limited    08298525
Bluestar Foods Limited    12435655
Compass Music Ipswich Limited    04648229
Cotswold Creative Living Limited    09055064
Cocoa Cashmere Limited    07063801
Goa Spice (Mexborough) Limited    11849430
Interstate Design Ltd    08999203
Jolly Colliers 122 Heanor Limited    12315226
Marston Road Store Limited    09614947
NU U Salon (Hair and Beauty) Limited    09480727
SA Food Stores Limited    10976928
Shoe Embassy London Limited    10448917
 
Members Voluntary Liquidations
Cary Trading Limited    11223836
 
Petitions to Wind Up
Cherhil Limited    10836497
 
Winding up orders
Golf Depot Limited    02995248

 

Types of Insolvency
Administration
Administration applies to limited companies and partnerships and is intended to get the company out of trouble and trading again if possible. Administrators can be appointed to a company that is unable, or is likely to become unable, to pay its debts. They can be appointed by the courts (on application from a creditor, directors or partners), the holder of a qualifying floating charge over the assets of the business, or the company or its directors. An administrator's primary goal is to rescue the company as a going concern. If this isn't possible, the administrator will try to get a better result for the creditors than would be possible if the company was wound up. If neither of these is possible, the administrator will sell the company's property to make at least a partial payment to one or more secured or preferential creditors, such as employees or the bank.
Administrators Meetings Para 51
This statement by the administrator of his proposals must be accompanied by an invitation to an initial creditors' meeting (Sch B1, para 51(1)).
Bankruptcy
This can only apply to individuals (including sole traders and individual members of a partnership). Bankruptcy petitions may be presented to the court by the individual, by creditors who are owed £750 or more, or by the supervisor of an individual voluntary arrangement. A bankruptcy order is made by the court.
Company Voluntary Arrangement (CVA)
A company comes to an arrangement with its creditors to pay the debts in full or in part over time. A CVA begins with the company (or its adviser) drafting a formal proposal at a Creditors' Meeting to pay part or all of the debts. If the proposal is accepted by the creditors, the arrangement will become legally binding and the directors will retain control of the company.
Compulsory Liquidation
This is the winding up of a company or a partnership by a court order (a winding up order). A petition is normally presented to the court by a creditor stating that he or she is owed a sum of money by the company and that the company cannot pay.
The Official Receiver becomes liquidator when the order is made but an Insolvency Practitioner will be appointed to take over if the company has significant assets. The liquidator's role is to realise the company's assets, pay all the fees and charges arising from the liquidation, and pay the creditors as far as funds allow in a strict order of priority.
Compulsory Liquidators Appointed S 136
When a winding-up order has been made, the Official Receiver is initially appointed as liquidator (section 136, IA 1986). The company's creditors and contributories may appoint another individual, who must be a registered insolvency practitioner, to act as liquidator (section 139, IA 1986). More than one liquidator can be appointed to act jointly.
Creditors' Voluntary Liquidation
Here the shareholders pass a resolution to wind the company up without the need for a court order. A Creditors' Meeting is held to nominate the appointment of a liquidator and consider a statement of affairs. Creditors can appoint a committee to work with the liquidator, whose role is to realise the company's assets, pay all the fees and charges arising from the liquidation, and pay the creditors as far as funds allow in a strict order of priority.
Creditors' Voluntary Liquidation Deemed in Consent Meeting
Creditors are now 'deemed to have consented' to a decision or resolution if 10% of creditors (by value) have not objected to it. In other words, if objections are not received by the specified decision date, creditors are 'deemed to have consented' to the decision or resolution.
Individual Voluntary Arrangement (IVA)
An individual comes to an arrangement with creditors to pay his/her debts in full or in part over time as an alternative to bankruptcy. The arrangement is set up by a licensed Insolvency Practitioner who will put it to a meeting of creditors. If the proposal is accepted at the meeting, the agreement reached with the creditors will be legally binding. An Interim Order is sometimes issued by a court and will immediately protect the debtor from any legal action by creditors.
Petitions to Wind Up
A winding up petition is a legal notice put forward to the court by a creditor. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent. Proceeds of the liquidation can be used to pay back creditors.

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