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Martin Bender - 10 March 2010

Please find below a copoy of a letter being sent to my MP today:-

Chris Grayling MP

House of Commons

London SW1A 0AA

10 March, 2010

Dear Chris,

Many thanks for your letter of 26 February replying to my email concerning "pre-packs".

I am not convinced you fully understand the pernicious nature of these or have taken into account fully their impact on creditors and the competition.

In my experience creditors receive very little, or nothing, from a 'pre-pack' so, in that regard, it is no different to a creditor from a liquidation. However, unlike a liquidation, the failed company is operating 'the next day' with \(often) the same owners/directors but under a \(slightly) different name. For the competition to see a competitor trading, having wiped its debts is, at best, unfair. The spurious benefit of jobs being saved is a nonsense – jobs are simply lost further down the line from those creditor companies that have to lay staff off because they haven't been paid.

It would appear that my concerns are justified because, if you read the article on page 13 of The Sunday Times \(7 March 2010), you will see how the system is being abused.

If the Tories cannot present themselves as understanding the needs and frustrations of the many tens of thousand of SME owners and directors then you will be perceived as being no different to Labour.

Yours sincerely,

Martin G. Bender

Mick Hart - 10 March 2010

Good work Martin - I hope you get a response, which is more than I received from my letter to our local MP (Kenneth Clarke).

http://www.ukprint.org/Prepack%20letter%20to%20K%20Clarke.doc

I get the distinct feeling that we are seen as just a pain in the ar5e at the moment, rocking the gravy boat - now is not the time to give in though

Martin Bender - 10 March 2010

Mick - well written letter to K. Clarke and disappointing, but not really surprising, that you have not had a response. I don't believe anyone in either of the 2 main parties has an in-depth understanding of the plight of the SME owner in particular or business issues in general.

William Joyce - 10 March 2010

Has HighWater -- in either of its manifestations -- failed to pay its creditors?

Edna Bag - 10 March 2010

Between the lines I would say they have failed to pay. The CVA if accepted by the creditors, \(think they have to get 75% agreeing with the offer) will block any creditor from taking further action to recover debt as the CVA is heard in court and becomes a legally binding undertaking. \(I guess its a little like Chapter 11 on this). The CVA would offer creditors included a percentage in the pound in settlement by installment over a term. IP's do well out of these as well and will take a high percentage of monies paid over and then release the dregs back to the creditors. Its hard to see how a company can get out of CVA, I think from ones I have seen they don't last. Once a plan has been broken the IP is obliged to report to the creditors the CVA has been breached, if it happens more than once the company will be bankrupted automatically. I guess from the creditors view it may recover more than other routes.

As clever clogs Joyce 'as pointed out, I's grabbed the wrong stick and mixed CVI's with CVA's. Highwater is a CVI 

S ANKLES - 10 March 2010

creditors dont get your hopes up.

We got £22 from £550 from a CVA, which 12 months after the CVA went into liquidation, as it transpired they were 3 months behind in payments to the CVA

Wonder if Highwater were ordering when insolvent? Illiegal isnt it ? But nothing will come of that - administrators just want an easy life and to look like they done some good.

Jon Fennell - 10 March 2010

SA. If you look at the amount of pre packs going on, you realise that all of them have knowingly traded and ordered knowing that the they cannot or will not repay the credit. It makes it worse when the offending company ''leans'' on suppliers to deliver even though they are late of payment.

The fact is unless you sit in the preferential creditor listing, you may as well kiss your ar5e goodbye to any money owed.

What is even more gauling in these situations is the IP getting first dibs at the expense of the rest, including HMRC.

Its surprising with the amount of revenue being lost, HMRC have not leaned on IS to sort out loopholes in the pre pack guides and make sure the system isn't abused, which is the case at the present.

William Joyce - 10 March 2010

Forgive me if I'm being naive but the intention is to liquidate HW D, having transferred sales and service to HW CTP, not enter a CVA. Presumably the intention could be to make full settlement as part of the liquidation. If not, the remedy is in your own hands, practice what you preach and don't buy a HighWater platesetter.

Jon Fennell - 10 March 2010

William your not being naive, Edna is being stupid and probably hungover, blind bat.

As you say, you would hope agreement on a settlement can be met. 

martin horner - 11 March 2010

i have e-mailed hague and cameron and had responses from them and my local mp, from there response they are getting loads of letters about the same thing not just print keep sending the e-mails it might just sink in.

Bin Crozier - 11 March 2010

Tucker by name, tuckup by nature

S ANKLES - 11 March 2010

So vote with our feet, dont buy from pre packs -

trouble is how many suppliers will there be soon with out prepacks.

Its so easy to do a pre pack, it makes me wonder whether these guys actually make a real effort to survive, or just go for the easy option without a care for those left in the wake.

Whose next .......

Clive Jonson - 11 March 2010

S Ankles asks whos next?

LS11 they way they are going about business, Same Company Different day.

The Agfa for supporting them

Jon Fennell - 11 March 2010

I have a simple and yet cunning plan to get over the problems we face with pre packs.

To level the playing field if we all pre pack, suppliers included, we can ensure the continued well being of the IP's, get to walk away from all debt and stuff the tax man and paper merchants.

Result, what do you think?  

Clive Jonson - 11 March 2010

Brilliant soution Jon F

Mick Hart - 11 March 2010

I just received a reply to my letter sent to Kenneth Clarke, seems he forwarded it to theirresponsible Minister, John Penrose. Link is to copy of letter

Reply from John Penrose, on behalf of Kenneth Clarke - re Pre-pack insolvencies

Mick Hart - 11 March 2010

Meant to say 'their responsible', not 'the irresponsible' !

martin horner - 11 March 2010

i have had the same letter

Jon Fennell - 11 March 2010

[quote user="Mick Hart"]

I just received a reply to my letter sent to Kenneth Clarke, seems he forwarded it to theirresponsible Minister, John Penrose. Link is to copy of letter

Reply from John Penrose, on behalf of Kenneth Clarke - re Pre-pack insolvencies

[/quote]OK, so really then the tories are as clueless as the labour party on this, I don't think they want it too change and continue to sit on the fence. Fills me with hope. May as well vote for the ''Whelk Eating and Equal Rights for Cockles Party''.

The only thing they are likely to do is put HMRC back on top of the pile to make sure they recapture lost revenues. Beyond that it keeps people in work and off the jobless figures.

Paper Sales - 11 March 2010

They are probably too busy rebuilding the pier in Weston-Super-Mud to concentrate on these pressing matters, nice bit of delegation there by Mr Clarke though.

Chris Lavers - 11 March 2010

Good work, Mick.  I didn't think Penrose's reply was that bad - at least he recognises there is a problem and it's the government that is dilly-dallying - you know, the socialists who decry they will help the vulnerable but in fact make even more people vulnerable.  Same with trade unions.  I wait with anticipation what Labour, Lib Dem, UKIP and BNP have to say.  (I'm ignoring the Green Party and the Monster Raving Loony Party for obvious reasons).  Should we have a page on Printweek just for these responses?

Here's one to chuck into the ring for anybody to ponder.  Cobra Beer (a notorious pre-pack), asks you to produce 1 million A6 16-pp stitched pamphlets for their upcoming promotion.  The offer is good and you'll make a nice profit.  Do you refuse because it's a pre-pack?

Jon Fennell - 11 March 2010

Here's one to chuck into the ring for anybody to ponder.  Cobra Beer (a notorious pre-pack), asks you to produce 1 million A6 16-pp stitched pamphlets for their upcoming promotion.  The offer is good and you'll make a nice profit.  Do you refuse because it's a pre-pack?

Damn you Lavers with your sneaky and underhand ways of being sensible, pay cash upfront, no offer on credit terms free curries (they can keep the beer) for life.    

Lena Johansson - 12 March 2010

I found this online, on a "Business Recovery and Rescue Specialists" website. I love the logic - no need to feel bad anymore!!!

"There is a significant issue with the pre-pack process which is often raised and which should be considered. This is that the creditors of the old company are left with unpaid debts which in turn may cause other businesses to fail.

However, the pre-pack process is not the reason why creditors lose money. Creditors lose money because a company is already failing or has failed. In this situation, it is likely that the old business will be put into administration and or wound up. As such, the fact that the creditors will lose out is inevitable.

The fact that creditors are owed money which they are unlikely to get back is not a product of the pre-pack process. This would have happened anyway. As such, the option of a phoenix or pre-pack administration should be compared to company liquidation or other likely outcomes, not the impossible dream of creditors being paid in full."

Stanley Dingtype - 12 March 2010

Unbelievable - bring back hanging, or at least the old fashioned bankruptcy court. Make the beggars pay one way or the other!

Love the monica by the way, "Business Recovery and Rescue Specialists" - should be the fourth emergency service!

Edna Bag - 15 March 2010

Loads of ads like this about one of them I saw claimed it used loopholes in the system not sure about loopholes, black holes more like.

It a legal rip off, like making bank robbery legal.  

Mick Hart - 15 March 2010

Stan - did you have something like this in mind?

Mick

Buddy 'ell - 15 March 2010

or maybe this projects a great lifestyle so richly deserved by our IP brothers

Busted printer - 15 March 2010

This is a general point and in no related to the High water organisation.

Before all you rightious people reach for the pitchforks and fire up the torches, I would like to paint a little litterary picture for you.

Man spends his life in print, working for numerous organisations and one day decides he wants to better himself. Quits his job and sets up small print shop.

Same man throws all his life savings at said print shop and works around 70 hours per week. Year 1 is good, year 2 is better, but man has left as much cash in the business as possible to fund growth. Things continue to improve and man realises he will need bigger machine, more staff and larger premisies. Same man then uses cash reserve to upgrade finishing equiptment, studio and pay deposit on new machine. Bank offer to finance the new machine if man signs tiny little piece of paper called personal guarantee, also needs to sign same paper for new landlord.

New staff settle in well, machine works great and man is still doing 70 hours per week.

THEN>>>> one morning it becomes apparant that the @rse has fallen out of the financial world. Good clients start to take longer to pay, not so good clients don't answer the phone anymore. 1 big client does a CVA and takes man down for a sum equivelant to 20% of the company turnover. 2 more clients go totally bust for smaller but substantial ammounts. man still pays staff, rent, paper and ink suppliers. This happens 2 or three more times and mans company is now in the mire. Man throws in kids savings, maxes out credit cards and borrows from parents, uses VAT and PAYE reserve to keep things going (OK, at this point man should have quit)

Things finally start to get busy but man is struggling to finance the upturn, Man then loses contract worth around half of turnover to a company just out of administration. Man finally realises it is time to pack up.

Man now has 2 choices:

1 - Wind up the company, sell his house and pay off the PG's, try to get a job and apply for a council house.

2 - Go into administration, clean off the debts, start again with the machine and premisies he will be paying for anyway under the PG's.

I realise that not all directors are honest but I also realise that sometimes, you gotta look after your own.

Which is what I shall be doing

Stanley Dingtype - 15 March 2010

Absolutely understand what you are saying Busted, but the argument does not make the course of action right. The chances are that if this wasn't a course of action that was either acceptable or available, then the situation 'man' finds himself in might not exist, as there would have been less chance of him getting 'dumped on' in the first place. I agree that 'man' might not feel he has any option but to behave in the same way as everyone else, but that doesn't make him right, or the system work, and does not detract from the fact that he is, in turn, simply offloading his own debt onto everyone else. It also does nothing to change the fact that he has (presumably) enjoyed an excellent standard of living and renumeration as a result of overstretching himself over the years, otherwise (presumably) he wouldn't have done this in the first place. It does nothing to alter the fact that he has not made provision for downturn or bad debt, as he should have done, and has not factored flexibility into his financial and banking arrangements.

Simple bankruptcy would at least afford his creditors some return for their own risk, and he would be free to join the rest of the 'normal' people in either the dole queue or gainful employment.

It isn't a case of lighting pitchforks or poking people with torches, it is just a case of fairness and common sense, which should apply to everyone in my opinion, but apparently doesn't.

Buddy 'ell - 15 March 2010

Would sympathise with man but then ask why.

there were no ongoing credit checks

he had no credit control and allowed debts to climb to crippling levels

he didn't keep risks at sensible level and cap clients at 10% of business, after times are hard and no company is immune  

Why man having been stung once didn't take steps to reduce debt from others and revise company size to reduce overheads talk to creditors and landlord to explain position

Why did ''good'' clients take longer to pay, good clients pay in 30 days or less.

Why man thinks its ok to offload debt and pass the problem onto someone else.

Mark Snee - 15 March 2010

Isn't your scenario, Busted, a bit like saying that if someone gets mugged in the street and has a load of cash taken off them, they are justified in then mugging someone else in order to recoup their loss?

Stanley Dingtype - 15 March 2010

Mister Snee, I wish us ducks could be as succinct and short winded whan we explain things (or try to) and didn't keep on going around and around the houses with unnecessary and over the top verbosity and waffle. That's pretty much near enough exactly what I was trying to say. But didn't. Not in so many words anyway.

Martin Bender - 15 March 2010

Whilst I have some sympathy with "Busted Printer" I would like to ask:-

1. At the "growth" stage was there built in a "what if" scenario, as in "what if the busienss does not grow as anticipated?"

2. One client accounting for 20% of revenue is far too high (I know this from bitter experience).  What steps had been taken to redress this?

3. What credit controls were in place? A mantra of "Chase early and vigourously" might have brought cash in sooner and prevented a doubtful debt becoming a bad debt.

Lena Johansson - 15 March 2010

There is a lot of "coulda/woudha/shouldha" and hindsight is great. Surely most companies that end up in the s**t didn't plan it that way. However, the way pre-packs have been made an attractive option could cause massive damage, as highlighted by Martin Bender's letter \(1st post above). If you haven't read the scary Times article already, please do:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6991762.ece

Buddy 'ell - 15 March 2010

Lena, pre packs and their effect are well documented, fought over and discussed, how much do you want to be scared and what do you want to know? R3 have as much to do with the problem as the IP's dealing in recovery.

You are looking at more than just a nice earner in pre packs that enables IP's to cream off cash from a distressed business to the detriment of its creditors, for the protection of some unscruplulous directors interests, under the guise of being in the interests of employees keeping jobs.

There is no ''could cause massive damage'' its already happened the Times is 2 years out of date. Every printer in the country has been affected by the use of pre packs and continued propped up capacity and low margins. Thats just one of the effects, dominoe effect of suppliers has not been factored in either, effects on credit risk for the industry, effects on banks re investment, effects on VC's regarding outstanding investment, the list is long.

The Insolvency Service is (for now) happy its policy (SIP16) is working, yet Audit Commission isn't and is due to release a 12 month review which will no doubt be enlightening and met with some incredulous commentary from the IS sandbox brigade.

HMRC have taken massive hits, ''billlions'' was used all at a time when the country is strapped for revenues and making cuts. Now why HMRC doesn't grab IS warmly by the throat and tell em to sort it out who knows.

Yes UK is a whore house for insolvency, but thats not all is it.

Lena Johansson - 15 March 2010

Alright, perhaps the Times and I are the only ones that are 2 years behind on this and everyone else is right on the button. I really didn't know that there was a whole load of insolvency tourism flowing into the UK and I think it is shocking, that's all. No point in going on about IP practitioners being greedy, the problem is the law that has made this possible.

Buddy 'ell - 15 March 2010

Agree the IS has made this simple to get round SIP16 is almost a form of self regulation, the IP's flount the rules for there own ends. They are no more innocent than the rule makers, they take high fees at at the expense of the creditors.

Lena there is every point in showing up all sides of pre pack, if the IP's are forced to cap their fee's (which is being looked at) then it makes some one else that bit better off out of a bad situation.    

Busted printer - 15 March 2010

Just to clarify.. the business will be wound up, all assets sold and all cash available will be dispursed.

If I have PG on the kit and premesies, I might as well be using them.

Edna Bag - 15 March 2010

So Busted what will you do any differently? 

Litho Sentinel - 15 March 2010

Busted been there with the PG's and the growth but managed to get out of that rat race and start a fresh by scaling the business right back. It is natural to follow the bigger is better path but as most of us know that turning over 1 Million to nett 100K does not mean 2 Million T/O will nett 200K simple and obvious I know and yet most of us fall for the turn over trap and go empire building and yet if we embarked on a more modest approach we probably be more profitable and wouldn't be so quick to cut our own throats to win that order over the competiton