Toys R Us: What happened & could it have been prevented?

Toys R Us

From the top of the food chain to rock bottom was the fate of Toys R Us in March this year. What was once a favourite place for any child to visit with their parent quickly descended into a downward spiral. We all have some great memories of visiting the retail store as an infant with it being bustling with new toys and the staff were ever so friendly. In its later years, it failed to keep up with the rising increase in online retail sales with parents simply buying toys online and getting them delivered, which could have been the main reason for their failure.

It was only in September 2017 Toys R Us declared bankruptcy and a few months later they announced store closures and then by March 2018 they had liquidated into thin air. Obviously, this is very sad for those that grew up loving the Toys R Us brand and everything they believed in, but the question is, could it have been prevented?

The $6 billion debt will not have helped Toys R Us in their long-term strategies, but if they financed their assets better they could have cut this down. For example, delegating more tasks to colleagues and cutting down on the number of people that they employ. Also if they closed down a few stores when they first acquired this debt in 2005 they may have in the long term benefited by saving a lot of money!

Toys R Us could have potentially averted any danger of liquidation if they kept up with the rise of online retailers like Amazon and eBay however that would have taken the companies to value away. A visit to a Toys R Us store was the highlight of every child’s week and the same effect cannot be projected from ordering something off the internet, so you have to commend them to stick to their guns, however, it didn’t pay off in the end.

Toys R Us will forever remain a great memory in everyone’s life and although many are sad its reign has come to end, it really isn’t a surprise with today’s ever-evolving retail market. If only they kept up with the rising competition, then perhaps they would still be a genuine contender!

If you feel as if you’re under the pressure of running a business and things aren’t going too well, Don’t stress, we can help you! Simply give us a call on 08000 724 558, email us on info@debtsolutionshub.co.uk or find out contact details on our contact page.

 

How can Debt Solutions Hub help you?

Debt Solutions Hub offers qualified advice from multiple practitioners. You want to ensure that you receive the right advice when it comes to your debt and Debt Solutions Hub assures this. All practitioners are committed to providing the appropriate advice for all clients. It is a given that all practitioners will work with your best interests at heart. You will be provided with the most thorough, honest, and simple debt advice and will get the chance to work closely with whoever is handling your case.

Common Debt Advice Issues

Directors of companies may experience difficulties with creditors. Debt solutions have years of experience in negotiations and agreements with creditors. Options available to you may include delaying bailiffs, postponing, or bringing a stop to the winding-up process. If further assistance is required, then Debt Solutions Hub can refer you to a solicitor or an accountant for further debt advice. Acting early is the main advice when dealing with debt, this will provide more options for you. Failure to pay Crown debts will lead to serious consequences. Alternative options for dealing with debt include refinancing, invoice factoring or, alternatively, insolvency rescue options such as a company voluntary arrangement. Debt Solutions Hub can assist you with all of these options.

Liquidation Advice

When it comes to compulsory liquidations the process may be initiated by the shareholders of a company or creditors. A winding-up petition is a serious matter and Debt Solutions Hub will ensure that you are given advice as quickly as possible to keep up with the short timeline. If your company has received a statutory demand and you are unable to pay the debt you must contact a practitioner as soon as possible to receive liquidation advice. It may only be a matter of weeks before your company will be forced to cease to trade or bank accounts frozen. Debt Solutions Hub may also offer advice for voluntary liquidation, this is used in circumstances where the company cannot be rescued. Once it has been placed in liquidation the trade will cease and directors will no longer have the power of the company.

If you would like to find out further information on the services which we offer, why not visit our Liquidation page or maybe just learn more about us as a company!

Wrongful Trading Advice

Section 214 of the Insolvency Act 1986 (“the Act”) defines wrongful trading as when the directors of a company continue to trade past the point where they knew, or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation.

This action is available to the liquidator of the company against not only directors who are registered at Companies House, but also de facto and shadow directors.

The key step for a liquidator is establishing the date at which it can be shown that the directors continued trading the company despite knowing, or ought to have known that the company was insolvent.

To prove that the directors ought to have known that the company was insolvent there is a two-part test as follows:

Assessing the general knowledge, skill and experience that may be reasonably expected of a person carrying out the same functions as are carried out by that director in relation to the Company; and
The general knowledge, skill and experience that the director has.

Should it be found that the individual has contravened this section of the Act, the court has wide discretion over the contribution that it can require, typically it would be for the amount that creditors have lost since it was found that the company was insolvent.

Do you think that you may be guilty and feel you need wrongful trading advice or at risk of it? Contact us at Debt Solutions Hub today to discuss your options.

Brexit – a third of UK Businesses risk insolvency

Many businesses in the UK face considerable financial difficulty as the uncertainty of ongoing trade with Europe continues. The value of the sterling, rising inflation and prolonged Brexit negotiations are all having a negative effect in many sectors.

Some organisations that trade with Europe have reached crisis point due to the inevitability of reduced trade under these circumstances and increased associated costs. According to the insolvency and restructuring body R3, a third of all companies are susceptible to insolvency up from around a quarter at the start of 2017.

Businesses at above average risk of insolvency include the technology sector, transport and haulage, professional services and outsourcing.

So what are the options available if your business is at risk of insolvency and how can you prevent a further worsening in your financial situation?

Professional advice is critical to establish the true position of your business and to identify the options available; the earlier advice is sought the more avenues are likely to be open to you.

At Debt Solutions Hub our main aim is to help save stressed businesses which can be attained in several ways. Once we have reviewed your financial position and the associated consequences of the problem we can discuss the options available to you.

Employee Benefit Trusts – The net tightens!

Employee Benefit Trusts (“EBT’S”) had become more prevalent over the last 10 – 15 years or so and were most heavily marketed to companies between around 2007 and 2014 as a means to reward employees in a tax efficient manner.

Typically companies would pay monies into a trust which could then be loaned to the employee on favourable terms without PAYE and NIC charges.

The schemes, which had to be notified to HMRC under their own disclosure rules were compliant with legislation and advice at the time and enabled companies to provide a significant benefit to its employees.

The net effect of these increasingly prevalent schemes was hundreds of millions of pounds of lost or unpaid tax revenue and unsurprisingly HMRC sought to close these loopholes resulting in hundreds of tribunals and significant delays before HMRC ‘s case could be heard.

The now famous Glasgow Rangers FC case marked a decisive victory for HMRC and the EBT net began to tighten. HMRC has always maintained that EBT schemes were not legal and viewed them as aggressive tax avoidance. Accordingly they are looking to challenge schemes retrospectively and armed with greatly increased powers.

The Accelerated Payment Notice (“APN”) was introduced in 2014 and allows HMRC to require, pending a Tribunal, payment of tax assessed by HMRC to be due under the EBT scheme.

Clearly, receipt of an APN could have a serious effect on a Company’s cash flow as it is required to pay potentially tens or hundreds of thousands of pounds to HMRC on short notice and in many instances this will result in significant financial distress.

Whilst the funds would be returned by HMRC, with interest, if the Company were to be successful at the Tribunal it is the Company who has to overcome the problems caused by its payment being held by HMRC pending a decision.

The legality of APN’s has been subject to challenge but in December 2017 the Court of Appeal handed down a ruling which supported the earlier decisions in favour of HMRC.

In conclusion, HMRC is winning its battle against EBT’s and the increasing use of APN’s represent a significant and serious threat to those companies that have used these schemes.

If your company has an EBT you should talk to your professional advisors or to a licensed Insolvency Practitioner. Alternatively, you can contact us for immediate advice.

Website Launch

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