The number of companies facing insolvent liquidation rose by 15% during the second quarter of 2008, as compared to the same period last year, as the credit crunch continues to impact upon the UK economy.

Figures from The Insolvency Service published on 1 August 2008 revealed that there were 3,560 compulsory liquidations and creditors' voluntary liquidations (CVLs) in England and Wales during the second quarter of 2008. This was made up of 1,324 compulsory liquidations, an increase of 19.8% on the previous quarter, and 2,236 CVLs, an increase of 7.3%.

Further evidence of an economic slowdown was highlighted by 1,246 other corporate insolvencies, comprising 177 receiverships, 938 administrations and 131 company voluntary arrangements, an increase of 63% compared to the same period last year.

These numbers support the findings of a recent survey (July 2008) undertaken by R3, the trade body for insolvency practitioners, which showed that 90% of respondents believed that a rise in business insolvencies would hit the UK in 12 months’ time, indicating that the worse is still to come.

The Insolvency Service figures support this survey and highlight retail, construction, property, leisure and manufacturing among the worst affected sectors as consumers rein in spending in the face of rising inflation rates and a deteriorating property market.

Offering his reaction to the latest statistics, Steve Smith, Head of Insolvency at Mercer & Hole comments: “These are very worrying figures and do not bode well for the UK corporate sector - particularly for small to medium-sized businesses which suffer most in a downturn. Of particular note is the rise in compulsory liquidation numbers which suggests that creditors are now seeking to recover their debts more aggressively as other forms of recovery become less effective.” 

• Email This
• Print
• Comments
• Trackbacks

We all know how to find a good service provider - personal recommendation. But what if you want help now and don't know who to ask?

One piece of good advice is to be wary of paying someone up front to find an investor for you - see Corporate Insolvency - Ecademy for an independent consultant's view. Any good professional will discuss your business with you first without charge and look to establish whether a business angel is likely to invest. I certainly would, and I would be delighted to help you find an investor if that's the best thing to do in all the circumstances. Of course, the right solution may be corporate or operational restructuring, or even the use of an insolvency process, and you may be advised to spend money with the professional to implement that optimum solution.

By the way, adding to the Ecademy post, if you want to find an insolvency practitioner (not that you need to look any further if you're reading this),  the most user-friendly search tool is at the website  of R3, the insolvency practitioners' trade body,  here.

• Email This
• Print
• Comments
• Trackbacks (1)

Companies in administration are to get a permanent exemption from empty property rates, Local Government Minister, John Healey, announced on 17 December. His decision on companies in administration was a consistent view put to the Department for Communities and Local Government in consultation and brings such businesses into line with those in liquidation and individuals subject to bankruptcy proceedings who already enjoy exemptions:

"We are committed to the promotion of a rescue culture which provides opportunities for insolvent companies that have viable underlying businesses to be rescued wherever possible. A permanent exemption will remove any potential for decisions about whether to enter administration to be distorted by differences in rates liability."

The department is now drafting the relevant secondary legislation to give effect to the reforms on empty property relief including introducing the new six month exemption from empty property rates for vacant industrial and warehouse properties, as announced in the 2007 Budget. The aim is to lay this secondary legislation before Parliament so that all aspects of the new reforms to empty property relief can come into effect on 1 April 2008.

R3, the Association of Business Recovery Professionals, notes here that the decision will overturn the controversial decision in the Trident Fashions case - Exeter City Council v Bairstow & Ors [2007] EWHC 400 (Ch) (02 March 2007). Commenting on the Government's move, the President of R3, Patricia Godfrey, said:

"This decision couldn't have come at a better time. With the effects of the credit crunch increasingly likely to be felt in the New Year, this move will help administrators save business and jobs."

The effects of the Trident decision and how it might be mitigated are discussed in our previous post here.

• Email This
• Print
• Comments
• Trackbacks (1)

Recent trade press reports Pre-pack administrations boosted by court decision - Accountancy Age and Pre-pack administration survives HMRC claim - Creditman refer to this case decided in March 2007.

The trigger was a press release by R3 (the Association of Business Recovery Professionals) quoting Dr Sandra Frisby, Baker & McKenzie Lecturer in Company and Commercial Law at Nottingham University, whose recent research into pre-packs (sponsored by R3) shows a significant increase in the use of pre-packs since the Enterprise Act 2002.

The judge rejected a claim by HMRC against the sale of DKLL Solicitors when DKLL made an application to the court to be placed into administration. This was to allow an immediate sale of the business to another (newly-formed) firm of solicitors, Drummonds Kirkwood LLP.

The judge said:

"I am particularly influenced by the fact that the proposed sale appears to be the only way of saving the jobs of the 50 odd employees of the partnership. The proposed sale is also likely to result in the affairs of the partnership's clients being dealt with, with the minimum of disruption."

Notably, the judge did not declare the pre-pack strategy unlawful, thus validating it as a legal rescue tool. Also importantly, the judge gave weight to the expertise and experience of impartial insolvency practitioners.

The judgement is available in full here.

• Email This
• Print
• Comments (2)
• Trackbacks