Road Haulage Insolvency Specialists

Road Haulage Association

 

 

IMPORTANT CONSIDERATIONS FOR HAULAGE BUSINESSES IN  FINANCIAL TROUBLE

 

 

Haulage businesses have had a terrible year with Operation Stack which never seems to go away, the shortage of drivers and strong sterling.   Individually these can financially stress the most successful road haulage business let alone having them all at once.  So what should directors do if they find their business is experiencing cash flow difficulties? The first thing is find out where they are by reviewing their book debts and liabilities and prepare a detailed weekly cash flow.  It may seem harsh but if liabilities are greater than assets or the company is unable to pay its debts as they fall due, a new raft of responsibilities fall upon the directors. It is imperative to take independent professional advice from a Licensed Insolvency Practitioner. This advice may save personal directors financial hardship and may breathe new financial life into the business.

The road haulage business has some very specific features not shared by other businesses and so it is vital you take advice from a Licensed Insolvency Practitioner who is aware of these specialisms. Most important is the Operating Licence.  It is vital this Operating Licence is retained by the business.  As directors are well aware the Operating Licensing system is based upon trust and is granted to a specific entity and so cannot be transferred with the sale of the business.   A new operator licence is likely to take 8 – 12 weeks to obtain.

When a business has financial difficulties there are alternatives available to directors.  Whilst the media often use the terms interchangeably there is a huge difference legally between them.   Alternatives are :

  • liquidation  The company ceases to trade with the assets being sold for the benefit of creditors.   This is a terminal event for the company even if part or the whole of the business is sold it is usually a “fire sale”. The Operating License would not be transferable.
  • pre-pack administration  The business is sold as a going concern immediately the company enters into Administration.  There are significant legal hoops to go through in carrying out a pre-pack sale in the road haulage business and again the Operating Licence cannot be transferred.
  • Administration  The Administrators take on the operational role and ownership of the business and assets including financing the ongoing business whilst it is being offered for sale. But an Administrator does not have the right to use the company’s Operator License and would need to apply to the Traffic Commissioner under special rules for permission to continue to operate vehicles during the administration of the insolvent entity.  Currently this takes between 8 -12 weeks.   This would significantly affect the viability of the Administration but it does protect the directors.
  • Company Voluntary Arrangement (CVA)  A CVA is where a line is drawn on the liabilities of the company BUT the directors remain in day to day control of the company and the shareholders remain in ownership of the business and assets – including the Operating Licence. The directors enter into a legally binding agreement between the company and its creditors monitored by a Licensed Insolvency Practitioner called a Supervisor.  Such an agreement covers the quantum and timing of any payments to unsecured creditors and protects directors and is binding on all unsecured creditors if accepted by 75% of voting creditors.   There are provisions allowing for the cost of redundancies to be made from the Redundancy Payment Office (RPO) which can allow companies to rationalise their staff.

Gibson Hewitt are experts in putting CVA’s in place and making them work.   It is the only true turnaround solution for all businesses but in particular for road haulage companies because the Operating License remains in place allowing the business to trade.

If you find your company has financial issues give Lynn Gibson BA(Econ) FCA FABRP MIPA IOD of Gibson Hewitt Limited a call for a free initial consultation. Gibson Hewitt Limited is a firm of Chartered Accountants and an associate member of RHA. Ring 01932 336149 or email lynn@gibsonhewitt.co.uk.

 

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