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60% of the 3.5 million companies in the UK now file accounts electronically and you can access those accounts free of charge via


Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.

New case clarifies the meaning of insolvency



When a company becomes insolvent there can be serious consequences:

  1. An increased risk of personal claims and Directors disqualification
  2. Winding up petitions
  3. Disposal of assets will be void once a winding up petition has been made
  4. Banks and Lenders will enforce their security
  5. Termination of contracts with customers and suppliers
  6. Transactions entered into within the previous 2 years can be reviewed and reversed

There are two tests for corporate insolvency:

  • the cash-flow test: is the company currently, or will it in the future, be unable to pay its debts as and when they fall due for payment?
  • the balance sheet test: is the value of the company’s assets less than the amount of its liabilities, taking into account as-yet uncertain and future liabilities?

If the evidence proves that the answer to either of these questions is yes on balance of probabilities, then the company is deemed insolvent under English law.

On the 9th May 2013 the Supreme Court ruled in the case of:

BNY Corporate Trustee Services Ltd & Ors v Eurosail-UK 2007- 3BL plc & 2 other cases [2013] UKSC 28

Lord Walker acknowledged the uncertainty that is inherent in the (Balance Sheet) test, commenting that: “it is still very far from an exact test, and the burden of proof must be on the party which asserts balance-sheet insolvency.” It will, therefore, not simply be a matter of looking at a company’s statutory balance sheet at a given moment in time as there may be relevant assets and liabilities not contained in that document. However, nor will it involve a rather more complex assessment of whether the debtor has reached the point of no return.

Further comments on the case:

It is of course true that a snapshot of a company’s balance sheet is not conclusive as to its commercial and economic viability, and to make every company in this position vulnerable to a winding-up or administration order would be unfair and uncommercial.

The Supreme Court’s decision should therefore be welcomed for clarifying that the two tests are mutually exclusive and both represent different ways of analysing whether a company is insolvent. The judgment does leave some issues unresolved, for example the correct methodology for discounting future liabilities and the timing of the accrual of future and contingent liabilities.

Is the UK doing enough to stop late payment?

Final demand concept.

Late payment kills businesses, it’s a fact.

Latest research shows that British SMEs are having to wait an average of 41 days longer than their original agreed payment terms before invoices are paid. (source: BACS)

Prime minister David Cameron said: “It’s not right that suppliers are not getting paid on time for the work they do and the services they provide. The government has already taken steps to help address this issue, but I am clear that more needs to be done to build a business culture across all sectors of the economy that sees the fair, prompt and reliable payment of suppliers become a core corporate responsibility.”

The government is to launch a consultation that will look at a range of issues including:

  • how to encourage greater responsibility for payment policies at board level;
  • what can be done to increase transparency around which companies are good payers and which ones are not;
  • how the Prompt Payment Code can be strengthened;
  • whether more can be done to enforce existing legislation, including the possible prohibition of “grossly unfair” payment terms;
  • what can be done to encourage more companies to make use of their existing statutory right to interest for late payments;
  • whether government can do more to help SMEs through new technologies and services like electronic invoicing and mobile payments.
Prompt Payment Code signatories undertake to:
Pay suppliers on time
  • within the terms agreed at the outset of the contract
  • without attempting to change payment terms retrospectively
  • without changing practice on length of payment for smaller companies on unreasonable grounds
Give clear guidance to suppliers
  • providing suppliers with clear and easily accessible guidance on payment procedures
  • ensuring there is a system for dealing with complaints and disputes which is communicated to suppliers
  • advising them promptly if there is any reason why an invoice will not be paid to the agreed terms
Encourage good practice
  • by requesting that lead suppliers encourage adoption of the code throughout their own supply chains


10 ways to improve your business credit rating

Woman builds up credit report score rating

Having a good credit score is essential in the current economic climate, your credit score will be checked by Customers, Suppliers and Banks/Lenders, so how can you improve your score?

1. Pay your bills on time – many credit rating agencies (Dun & Bradstreet, Creditsafe, Risk Disk to name a few) now collect payment data from your suppliers every month and update your score, often showing days beyond terms (DBT), if you have a dispute with a supplier try to resolve it quickly as it could affect your credit score.

2. Don’t make multiple applications for credit – credit searches by lenders leave footprints on your credit file and could make it look like you have cash flow problems.

3. File your accounts on time – late filing can really hurt your credit score, sometimes it can reduce your score by 50%.

4. Avoid CCJ’s – Getting a judgement against your business even for a small value is extremely damaging to your score.

5. Retain Profit – this increases net worth and shows you are investing in your business.

6. Record Borrowing Terms – in your published accounts and notes makesure you explain the terms and split the loan between short and long term, if all your loans are shown as short term this will damage your score because it will impact on working capital.

7. Review Share Capital – if you have directors loans that you have made to the business and you aren’t expecting repayment in the near future convert them to Share Capital, this will increase net worth.

8. Keep Credit Card Balances below 30% – Its bad for your credit score to max out your business credit card and its also bad to have too many business credit cards, it makes your business appear desparate for cash.

9. Avoid Negative Net Worth – it can wipe out your score.

10. Fix any mistakes – if a credit score is wrong and contains errors speak to the credit agency and get it fixed.

Do you have any tips to share?

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