Peter Sargent discusses turnaround policies and procedures in the UK. He provides an overview of government agencies that deal with insolvency and turnaround, including the Insolvency Service which legislates, regulates insolvency practitioners, and investigates directors. Sargent also discusses the history of turnaround support for UK businesses, noting that traditionally accountants have handled insolvency cases. Key factors for successful business turnarounds include the availability of flexible procedures, appropriate financing, management and workforce buy-in, and a positive creditor attitude.

1. From failure to turnaround
Peter Sargent
BHP Clough Corporate Solutions
West & South Yorkshire, United Kingdom

2. From failure to turnaround
 Turnaround Policies and Procedures in the UK
 An Introduction to the UK Government Agencies which deal with
Insolvency and Turnaround
 A brief history of turnaround support for UK SMEs
 Government policy in perspective and future changes

3. Being in business
 I take my hat off and bow to anyone who is brave enough to start their own
business, they deserve to succeed.
 Failure is not a life style choice, sometimes it happens, get over it, and get
on with life.
 You only fail when you stop trying

4. Turnaround policies and procedures in the UK
UK Insolvency legislation is made up of:-
 Insolvency Act 1986
 EC Regulation on Insolvency Proceedings 2000
 Insolvency Rules 1986
It was the Insolvency Act 1986 which created the profession of Insolvency
Practitioner in the UK

5. The Insolvency service
 Legislator
 Regulator
 Investigator
 Create the Law
 Regulate the Profession
 Disqualify bad directors

6. Overview of Insolvency Legislation
 Corporate (Business)
 Personal Insolvency (Domestic
& some business)
 Company Voluntary Arrangement
 Administration
 Liquidation
 Debt Relief Order
 Individual Voluntary Arrangement
 Bankruptcy

7. Regulation of the Insolvency Practitioner
 Insolvency Service is the regulator of regulators
 The Insolvency Act 1986 created recognised professional bodies (RPBs) who
regulate the individual IP
 The current RPBs are the accountancy bodies, plus the Insolvency
Practitioners Association

8. The Insolvency Practitioner
 Usually accountancy trained, but can be a lawyer
 A system of professional regulation introduced
 Insured for professional negligence, and fraud
 Assets had been at greater risk
 Fraud and theft had not been uncommon

9. The work of the Insolvency Practitioner
 Realise Assets
 Agree Claims
 Investigate the reasons for failure
 Distribute the funds
The philosophy is to try and save the company or the business, if that is not
possible get the best return for creditors.
Is the IP a recycler, or garbage collector?

10. A short history of turnaround support
 Traditionally the accountancy profession has handled Insolvency and
Turnaround assignments
 Current Legislation is rooted in the Insolvency Act 1986
 The concepts of CVA, and Administration was introduced alongside
Liquidation and Receivership.
 Created the new profession of Insolvency Practitioner

11. Attitude to failure
 Failure in business seen as a fraud, ‘Dickensian Attitude’
 Failure is not bad unless you stop trying
 A modern dynamic enterprising economy needs a fair system which deals
with failure as much as it rewards success

12. The prepack sale (1)
 A controversial procedure used by IPs to sell businesses
 Often sold back to existing management without creditor consultation
 The sale price achieved is often perceived as poor by creditors
 Free of debt
 Often free of employee obligations
 Creditor attitude is hostile
 Politicians see it as the IP helping to defraud creditors

13. The prepack sale (2)
 Creditor and political hostility
 Prepack Pool
 Nominated pool member reviews the prepack
 Traffic light approval system
 Not compulsory

14. Turnaround support for SMEs
 Support has been poor in the UK
 The formal procedures which allow for turnaround are CVA and
Administration
 The CVA procedure
 The Administration procedure
 Flexibility is the key
 A successful turnaround needs to start with the question why is this
business failing

15. Reasons for failure
 Catastrophic natural events
 Catastrophic business events
 Loss of market
 Technological changes
In a dynamic economy there are always opportunities to be taken advantage of
Multiple recessions make a society more accepting of failure, which can help in
achieving turnaround success

16. Key factors of turnaround for business and government
policy
The key ingredients of a successful turnaround
 Procedure
 Business culture
 Management
 Finance
 Product

17. Procedure and culture
 Government needs to provide the legal procedures which allow for
turnaround, giving business breathing space to reorganise
 Government needs to educate the business community that it is okay to
take risks
 Finance needs to be available for turnaround situations
 Trusted independent professionals need to be available to lead
turnarounds
 Management and the workforce need to embrace changes needed to
achieve success

18. Ingredients of a successful turnaround
 Realise there is a problem before it is too late
 The availability of a strong but flexible procedure to protect the business
going through a turnaround
 Appropriate finance needs to be available
 A positive attitude from creditors
 The buy in and support of management and workforce
Cooperation at all levels not confrontation is the best way to achieve a
successful outcome

19. In the UK today
 Procedures are available (CVA and Administration)
 Funding is provided from many different sources
 There is a regulated profession
 There is some great management
But
 Creditor buy in is poor
 Suppliers are reluctant to give credit
 Self interest takes over

20. The future
 Government consultation on providing a breathing space from creditor
pressure
 Low cost funding needs to be available
 Creditor education and trust in the system and those operating within it
needs to improve
 High levels of economic and political uncertainty over Brexit!

21. Any questions?
Peter Sargent
BHP, Clough Corporate Solutions
Peter.sargent@bhpccs.co.uk
This presentation and any accompanying notes are provided as information only and should not be
relied upon as advice, or treated as such. No liability is accepted for any errors of fact or opinion they
may contain. Professional advice should always be sought before making any decisions.