Retail insolvency news
For those of you who are not accountants - or don't read Accountancy Age - the quotes below are from its article "Retailers protected from impact of Trident ruling" published on 10 January 2008.
We reported the UK government's decision to exempt companies in administration from empty property rates in an earlier post.
We reported the UK government's decision to exempt companies in administration from empty property rates in an earlier post.
President of R3 Patricia Godfrey says the decision couldn’t have been better timed for retailers: ‘With the effects of the credit crunch increasingly likely to be felt in the New Year, this move will help administrators save business and jobs.’
Mercer & Hole business recovery partner Chris Laughton agrees, highlighting the credit crunch as likely to lead to more retail insolvencies. Removing the preferential treatment on business rates for unoccupied properties would save businesses.
‘The decision will help what will be a higher number of retail insolvencies than last year,’ Laughton says.
Oh yeah? Can't really see how it will save businesses.
What it will save is cash for secured lenders, who otherwise would have suffered empty rates as a cost of realisation.
Retailers in administration will sell for whatever they're worth, as before - and whatever shops are left will simply cost less to hold in admin than previously - and probably meaning the dash for CVL and disclaiming assets will be less hurried.
Cannot really see this making a big difference to retailers.
Paul
Your realism balances the Age's enthusiastic tone, but I don't think the proposed changes will only benefit secured lenders.
In many cases of course administrators cannot achieve the first statutory objective of saving the company and its business as a going concern. But even then the insolvency can be helped by lower administration expenses, possibly leading to achievement of the second statutory objective of a better result than liquidation.
In either of these situations the change offers some scope to the creative administrator.
Yes, sometimes it will just be the secured creditor who benefits - it depends where the value-break falls. But the extra value could offer more time before the sale, perhaps even before the administration, to save the business.
Optimistic? Not unnecessarily so, and removing administrators' empty rates liabilities certainly won't harm the retail industry.