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Updated: 22nd January 2021

E-Cigarette Industry Changes Could Lead to Insolvencies

It is feared the new Tobacco Products Directive (TPD) will signal an increase in the number of e-cigarette companies facing insolvency. The new regulations introduce sweeping changes to the way in which e-cigarettes can be marketed and sold, and threaten to cause serious financial disruption to companies operating in the industry. 

Electronic cigarettes are now categorised as tobacco-related products, and as such must meet stringent requirements, including restrictions on size and volume. Clear labelling and warnings about health are now also essential, creating considerable additional cost for manufacturers and retailers.

What are the changes being introduced?

  • No containers or refills of e-liquid can be over 10ml in volume
  • The volume of vaping canisters/cartridges is to be no more than 2ml
  • Nicotine strength of an e-liquid has been capped at 20mg/l
  • Manufacturers must advise regulators of any new products six months prior to launch
  • Colourings, caffeine and taurine, are no longer permissible ingredients
  • Products must have clear labelling
  • E-liquids have to be sold in child-resistant and tamper-proof containers
  • Manufacturers and importers of e-cigarettes and liquids must notify the Medicines and Health Care Products Regulation Agency (MHRA) of their products prior to sale. In the case of new varieties, this must be six months prior to their launch.

How will the new laws affect e-cigarette companies?

Licensing products as pharmaceutical supplies is a very expensive process which generally, only the largest companies can afford - an expense also compounded by the fact that producers must license each product variety individually with MHRA before it can be sold.

Until 20th May 2017, retailers can sell stock that does not comply with the new regulations, but after this date they must sell only licensed goods. MHRA will issue a list of products on their website, which have been notified to them by producers as compliant. Retailers are expected to check the list to ensure they sell only e-cigarette merchandise that complies with TPD.

Clearly, a significant shortfall in working capital is likely to occur if much of a company’s existing stock suddenly becomes obsolete. If there are no additional sources of cash to cover this shortfall, insolvency is on the cards for many businesses.

Free advice from insolvency professionals

Real Business Rescue are specialists in business recovery, and can offer free advice if your e-cigarette company is experiencing financial distress because of the new regulations. We will assess your current situation, explain all the options open to you, and advise on the best way forward.

Depending on the financial outlook for your business, this may involve taking steps to deal with insolvency. If so, we can negotiate with creditors on your behalf and ensure you comply with insolvency laws.

What courses of action might be available for e-cigarette companies?

Additional finance
A lump sum or regular input of working capital could help you overcome a seemingly impossible cash flow situation. If your business takes payments via credit and debit cards, a merchant cash advance could provide a cash injection based on your level of sales.

At Real Business Rescue we have specific industry experience, and contacts with more than 50 alternative lenders. We can guide you towards the most flexible type of funding for your business, at the lowest cost possible.

Time to Pay Arrangement (TTP)
A Time to Pay Arrangement may be offered to your company by HMRC if you have tax or National Insurance arrears, and the current problems are deemed to be temporary. Although you can negotiate with HMRC yourself as a director, there is much value in a licensed insolvency practitioner liaising on your behalf.

Our IPs have extensive experience of successful negotiations of this type. We will address the concerns commonly held by HMRC, instil confidence in your ability to repay over an extended period (usually 3-6 months), and provide reassurance that they will recover their money. 

If your e-cigarette company is struggling due to the recent legislative changes, obtain free professional advice from the business rescue professionals. Real Business Rescue is a major part of Begbies Traynor Group, the UK’s leading corporate rescue and recovery practice. Call today to arrange a free same-day consultation.

Keith Tully


0800 644 6080
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