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PROTECTING YOUR POSITION

If you get lost and ask for directions, the suggestion that “you don’t want to start from here” is rarely, if ever, helpful.

So it is with advice about bad debts and customers failing owing significant sums. Provided the debt isn’t going to cause a “domino effect” failure lessons need to be learned from each painful loss. A sale is never a sale until it is paid for and it is wise to ensure that you only reward your team based on sales that are actually paid for. If not, you should at least have a clawback clause in employment contracts.

When a business you have been dealing with fails and you find yourself dealing with the liquidator, administrator, official receiver, or trustee in bankruptcy etc. you need to take active steps to protect your position.

The removal of the Crown’s preferential status and the introduction of “the prescribed part” (a ring-fenced fund that must be made available to unsecured creditors in a liquidation or administration) was an attempt to better apply a fair distribution. Sadly, too many prescribed part payments amount to only fractions of a penny in the pound and serve only to annoy creditors whose fingers have been burned.

Action plan

No list of actionable steps will ever be complete, but avenues to pursue include taking good advice quickly, especially if the sums involved are significant, and checking that the company in insolvency is the one that you supplied and whether you can recover any goods supplied under retention of title. If so, act promptly. Similarly, if you have a ransom/leverage position to secure payment consider using it.

Ask questions about what happened to stock you supplied. Did it go straight to someone else? Has it created a debtor? Where is that balance now showing as due? Were any of your supplies made via inter-group transfers to associated, group or successor companies which have resulted in you being put in a worse position? Are they challengeable?

And then there is what you were told to secure the supply. Was any of this an exaggeration or false? It’s entirely possible that Theft Act or other offences have been committed. Also consider if sales were made on the introduction of a third party. Could there be any recourse to them?

Don’t disregard anything you’ve heard on the grapevine that may be of assistance as contracts may have gone off to a director’s new company or employer for example. Can any of this information assist the insolvency practitioner to prosecute or disqualify the directors and shadow directors? This could aid recovery of funds or go some way to prevent a repeat performance.

Lastly, claim any VAT bad debt relief, and in terms of dealing with the insolvency practitioner, submit your proof of debt and vote for who you want appointed as soon as possible.

Don’t ignore ROT

Retention or Reservation of Title (ROT) clauses are attempts to amend the Sale of Goods Act so that suppliers of goods are able, where they have satisfied all of the legal requirements, to get their goods back when a customer isn’t able to pay them.

ROT clauses are no silver bullet. They are of limited use in certain markets – suppliers of services or perishable goods in particular. Hauliers, for example, claiming ROT over freight they’ve moved will find the process doesn’t work.

The purchaser must still have possession of the goods. Whilst the ROT clause may be effective against the original buyer it will not work against a third party acquiring the goods “in good faith” and without notice of the clause. Trying to trace into sale proceeds is unlikely to succeed. Generally, the goods supplied will have to be in an “as delivered” condition – for example, leather is as it was delivered not how it has become when made into seat covers for a classic car. Where a component has been bolted into an engine and it may be unbolted then it is “economically separable” and recoverable, as might panels that have been bolted into place. But panels welded on or a resprayed panel won’t be. There have been arguments over petrol put into a petrol tank – are you taking out only the petrol you supplied or are you also taking petrol that was already in the tank?

Clearly it is easier to argue over goods that are on a shelf that can be identified as having been supplied by you and have not been paid for. This last point doesn’t matter so much where there is an “all monies clause” as with this anything you’ve supplied may be claimed provided there has always been a debt outstanding. That said, once the balance is cleared to zero title on all previous deliveries is likely to have passed to the customer.

Exercising your rights must be balanced against the costs of collecting your goods, re-stocking them in the warehouse and the probability of being able to re-sell them (especially if they were bespoke/made to order).

When there is an insolvency ROT may give you some leverage – especially if your goods are key to the company finishing work in progress. You should incorporate your ROT clause into your contracts (before the supply of goods and this means going well beyond just having terms and conditions on the back of invoices, referred to elsewhere or on your website).

But when you sell goods on credit you need to keep your ear to the ground, be proactive and act quickly when things start going wrong with one of your debtors. Prevention is always better than cure.

Insolvency and employees

It’s a sad fact that employees also lose out when their employer fails. The Employment Rights Act 1996 (ERA) provides employees of an insolvent business with the right to make claims against the National Insurance Fund (NIF) through the Redundancy Payments Office. This accelerates payments to employees (usually 6-8 weeks from the date of insolvency) and so negates some of the impact on them. The NIF then claims in the insolvency “standing in the shoes” of employees for sums paid.

Under current rules, an employee will be able to claim for arrears of pay; all accrued holiday pay; unpaid contributions to an occupational pension scheme; any protective award made by an employment tribunal; pay in lieu of notice, damages for wrongful dismissal or unfair dismissal; and redundancy.

The amounts paid out to employees by the NIF are currently limited to £508 (effective from 6 April 2018) per week per employee (for each of the entitlements above). Therefore, if an employee earns above £508 per week, the excess will be treated as an unsecured claim and will only be paid if anything is paid through the insolvency to unsecured creditors.

Sub-contractors are not considered employees which means that they are unable to claim against the NIF. Any amounts due to a sub-contractor for work done will be treated as an unsecured claim in the insolvency.

 In terms of other types of claims, such as expenses for items that include mileage or travelling, these cannot be claimed against the NIF. However, the employee can submit a claim in the insolvency as an unsecured creditor for any of these.

As for directors, the ERA defines an employee as an individual who has entered into or works under a contract of employment. A contract of employment is defined as a contract of service … whether express or implied, and … whether oral or in writing.

It is fair to say that claims by a director as an employee are subject to greater scrutiny than the claim of an employee. Unfortunately, some of the decisions made by directors in order to improve the financial position of a company could adversely affect their ability to make a successful claim to the NIF for any of the entitlements listed earlier.

Some of the more common factors taken into account by the NIF in deciding whether to accept a director’s claim as an employee involve whether the director received a regular monthly/weekly salary; if they’d made any PAYE and Class 1 National Insurance Contributions; whether they had a signed contract of employment (dated prior to the insolvency); and whether the director took holiday.

If the answer to any of the above questions is no then, in an insolvency, a director’s claim as an employee may be rejected by the NIF.

However, case law provides that no single factor is conclusive and that all factors must be weighed up to decide whether a director is also an employee.

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ENGINE OIL REMOVED FROM SALE FOLLOWING INVESTIGATION

Granville Oil and Chemicals has removed 5W30 Hypalube Evo from sale, following an investigation by VLS (Verification of Lubricant Specifications).

A complaint was received in November 2017 concerning the ability of the product to meet its own technical specifications and the claims it made regarding OEM specifications. In particular, it was alleged that the product did not meet its own stated NOACK volatility measure and that its claims for OEM specifications of VW 504.00/507.00, PSA B71 2290 and GM LL–A/B–025 were unfeasible as no additive package was available at the time to meet those requirements.

Test showed that the product failed to m

Oil has been withdrawn

eet the stated NOACK volatility measure. The VLS technical panel also raised questions about the claims relating to PSA B71 2290 and GM LL-A/B-025.

Granville Oil & Chemicals Ltd ‘cooperated fully’ with the investigation and undertook its own internal investigation, with the result that the product was discontinued effective 30th June 2018.

Thanking Granville for its cooperation in the investigation, David Wright, Secretary of VLS and Chairman of UKLA added: “This case is a perfect example of VLS performing its vital role to maintain standards in the industry and ensure an open and transparent market. Customers must be able to have confidence that the products they purchase really can deliver what is claimed.”

 

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DVSA BOSS: WHAT WE’VE LEARNT FROM MOT CHANGES

In a blog post, Neil Barlow, DVSA’s Head of MOT Policy has reflected on the changes to the test, implemented in May.

Writing for authorised examiners, he noted: “Before 20 May, the training environment we set up to help you get used to the changes was used by over 12,000 testers. Your feedback showed that most of you found this useful, so we’ll look at providing a similar training environment again for any large changes in the future.”

Barlow observed that testers were taking longer to record defects, though this was ‘hardly surprising’ given the new structure. He also noted that the wording, which had been criticised by a number of testers for being technically or grammatically ambiguous, was being updated.

On a slightly different subject, Barlow wrote how the Agency was reviewing the ‘risk rating’ for testing centres. This will look at a number of factors and the station will be logged under a ‘traffic light’ scheme accordingly. “We’ll do some calculations based around testers and this will be pulled together to form an overall score for the garage. We’re working hard to make sure that this information is clear and open to those that need it” concluded Barlow.

Mixed responses for 4-1-1 proposition

Read Barlow’s full blog post here

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MOTORCARE MOTOR FACTORS ACQUIRED BY GROUPAUTO PARENT

Abergavenny-based Motorcare Motor Factors has been taken over by AAG, parent of the GroupAuto buying group.

The Motorcare chain comprises of six branches in Wales and the West of England. A branch in Brecon was opened as recently as April of this year.

Motorcare Discount (as it was originally known) was founded in 1984 in Abergavenny by Allen Bailey as an accessory and parts retail store, catering mainly for DIYers. In common with many parts shops it started doing an increasing amount of trade work, and it moved to an industrial unit in the mid-1990s.

Further branches followed from 2010 onwards, and the family-run chain picked up several GroupAuto member awards, including Member of the Year for the large factor, light vehicle category in 2017 (pictured)

Bob Ackroyd Managing Director GROUPAUTO, Justin Bailey and Simon Bailey of Motorcare Motor Factors.

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Movers Correction

In Movers and Shakers in the July issue, we mentioned that Carl Whitlam has started in a role at Hella Gutmann Solutions.

Well,  gremlins got into the system and we had mistakenly picked up a story dated exactly one year earlier. Carl Whitlam is no longer at HGS. We apologise to all for the confusion caused.

 

Posted in Greg Whitaker's diaryComments (0)

HELLA SELLS DISTRIBUTORS TO MEKONOMEN

Hella GmbH is selling its Danish and Polish parts distributors, FTZ Autodele & Verktoj  (FTZ) and Inter-Team s.p to the Swedish wholesaler, Mekonomen AB. A corresponding agreement has been signed by both companies. Terms of the deal amount to €395 million on a cash- and debt-free basis. In addition, a consideration equivalent to profits generated from November 30, 2017 to completion of the transaction will be paid to Hella. The sale is subject to approval  and is expected to close in Q3 2018. Financial advice was provided by Jefferies,

“With Mekonomen, a renowned wholesaler will take over our activities in Denmark and Poland, which will strategically develop the business,” explains Dr Werner Benade, Hella GmbH Managing Director. “We will systematically focus the Aftermarket segment on the independent spare parts business and innovative workshop equipment. As part of this, we are accelerating the interaction between the divisions and opening up digital business models.”

Pehr Oscarson, President and CEO of Mekonomen, adds: “Through the acquisition of FTZ and Inter-Team, we strengthen our position as a leading automotive spare-parts distributor in the Nordic region and take the step into Europe. The acquisition is in line with our strategy of playing a central role in the ongoing consolidation in Europe. These are two well-run companies that will continue to develop within the framework of existing corporate structures and brands as standalone companies in the Group.”

FTZ and Inter-Team employ a total of around 2,500 people. The two wholesalers achieved total sales of around €480 million in the 2016/2017 financial year. This corresponds to about seven percent of HELLA’s group consolidated sales.

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SPARTAN OPENS ADDITIONAL BRANCHES

South Wales-based Spartan Motor Factors has opened two new branches in Blackwood and Swansea.

The Blackwood branch measures 4000 sq ft, has five  drivers and three counter staff while the Swansea branch is 5,500 sq ft, and has two counter staff and three drivers.

These opening are in addition to  a branch in Pontypridd in April and a cooling division specialising in air conditioning and radiator repairs in Abercarn that opened in May.

Director Lee Gratton said: “This takes the total number of branches to 10 with the head office still based in Cardiff. We are actively looking to expand the Spartan network further into England through either acquisitions or branch openings if the right individuals approach us , we have depots in Avonmouth and Weston Super Mare at present”.

New Spartan in Swansea

 

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THE GREEN SUPPLIER: BATTERY TECHNOLGIES

PROMO ARTICLE ON BEHALF OF ECOBAT GROUP

 

There is a lot more to the ECOBAT group than meets the eye. Besides being Europe’s largest specialist battery distributor, the group is also a leading collector and recycler of used batteries on three continents. In the EU it fulfils battery collection services through operations in Germany, France, Italy, Norway, Poland, and the UK, collecting batteries from all over Europe.

ECOBAT’s processes ensure that more than 97% of material is recovered from the ‘End of Life’ battery during the recycling process.

Battery recycling typically generates three main elements:

  • Lead
  • Plastic
  • Sulphuric acid.

At ECOBAT’s recycling operations, batteries are broken under controlled conditions to release acid, then crushed in a hammer mill and broken into smaller pieces for physical separation using water. Through the separation process, plastics float to the surface where they are removed for further separation before recycling. The lead components (plates, poles and paste) sink in the hydro-separation tanks and are removed for smelting. Before the paste can be smelted however, it is dewatered.

The battery paste and other lead-containing materials are fed into furnaces together with a reducing agent and smelted to produce lead metal. The grids and poles are also smelted in the same way. The lead recovered through the smelting process is then refined to produce various bespoke lead alloys, primarily for the battery industry.

In Europe up to 75% of the lead material consumed is derived from secondary recycling rather than primary production.

The recovered sulphuric acid can be processed to produce sodium or calcium sulphate which can be used in a variety of applications. Sodium sulphate, for example, can be used in detergent, glass and textile manufacturing. Calcium sulphate has a wide range of industrial uses from the construction industry to the food industry.

Plastics recovered from the recycling operations are further sorted into various fractions and of these the most valuable is polypropylene from the battery case. This is processed and cleaned and is then broken into chip, dried, compounded, melted and extruded to form plastic pellets. New battery cases and other automotive products are produced from these pellets, with several vehicle manufacturers among the list of ECOBAT’s customers.

 

In the UK, ECOBAT Battery Technologies, formally Manbat, utilises the group’s expertise to provide a fully compliant battery scrap collection service. All collections are then recycled through its own group smelting facilities. This is not only complementary to its core specialist battery supplier activity, but also positions it as a true ‘closed loop’ green supplier.

 

For further details, please contact ECOBAT Battery Technologies on: 01743 218500 or visit: www.ecobat.tech

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PEOPLE NEWS: JIM MAZZA JOINS PDP BUYING GROUP

Buying group Parts Distribution Partnership has announced that Jim Mazza will be joining the Group’s management team with immediate effect. Working with the members, he will assist in every aspect of the groups development.

Jim Mazza will be best known to CAT readers as the former Managing Director of AAG’s trading groups in the UK. Prior to that, he enjoyed a successful career at plumbing and builder’s merchant Wolseley UK.

PDP Chair, Alastair Whatmore commented: “With consolidation in the market showing little signs of slowing down, we recognise the need to change, to grow and to develop a group that is well positioned to take advantage of the opportunities that undoubtedly exist for independent motor factors and suppliers. Jim has an impressive track record in the automotive aftermarket and brings to our group a wealth of experience and buying group knowledge which will undoubtedly help us achieve our objectives”.

Jim Mazza added: “A decision to join the PDP team was not taken lightly and having spent some time looking at what the PDP does and its hopes and aspirations, I came away convinced that the group presents exciting prospects to grow and develop initially for the benefit of the existing membership, but ultimately for those motor factors looking for safe harbour in turbulent times”.

“PDP is undoubtedly a platform to build on, and I am looking forward with relish to working with the group, its members and its supplier partners and helping PDP achieve its ambitions”.

 

 

 

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CUSTOMER DETAILS COMPROMISED AFTER SNAP-ON HACK

Tool and equipment supplier Snap-on has been admitted to having it’s sales website hacked and UK customer data compromised.

Names and email addresses of registered customers were taken from the buy1.snapon site. Credit card or other payment details remain secure as these are processed by a secure third party and are not on Snap-on’s database.

The firm learnt of the breach with the assistance of a cybersecurity company and immediately informed the FBI. Affected customers then received a letter from the company explaining the situation.

Countries affected by the incident include the UK as well as New Zealand, Australia and Canada. Although the company is U.S based, the online platform has not been used domestically since 2013.

At Snap-on, we understand the importance of our customer’s information and we are working continually to strengthen our security systems and protect our customers’ data” the company said in a statement after confirming the facts of the breach.  At the time of writing, the affected site remains offline.

Posted in Factor & Supplier News, Garage News, Latest News, NewsComments (0)

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