The Insolvency Service recently released the insolvency statistics for the period April to June 2014.
It is fair to say that the results are mixed.
The company liquidation rate (i.e. the percentage of active companies put into liquidation) fell to 0.56%, which is the lowest level since records began in 1984.
The reduction is a result of continued decline in the number of creditors’ voluntary liquidations (CVLs) (i.e. companies taking a proactive approach and entering liquidation on the basis that they cannot continue to trade). CVLs have fallen for the last four quarters.
Winding up orders remain relatively stable with 974 compulsory liquidations for the quarter.
Paul Formby, Insolvency & Corporate Recovery Associate at SAS Daniels LLP in Stockport, said: “In previous recessions insolvency numbers have risen as the recession ends. Whilst this may seem counter-intuitive it does make sense as the directors and shareholders of companies that are struggling, often referred to as zombie companies, decide to cut their losses and pursue other ventures. At the same time as markets improve creditors may lose patience and calculate that they will get a better return via an insolvency as asset values increase.”
“The corporate insolvency figures, therefore, suggest that there is some way to go before the economy can be considered to have recovered completely.”
Conversely, there has been a significant rise in personal insolvency numbers, up over 5% on the same time last year which has been driven by an increase in IVAs, Individual Voluntary Arrangements, up 20% in the same period to a record high since IVAs were introduced further to the Insolvency Act 1986.
Paul concludes: “At SAS Daniels, we have seen a significant increase in personal and corporate insolvency cases, as much as 43% increase in the last four months. We think this is down to creditors now putting more pressure on debtors and pursuing those in debt as the economy and the prospect of recovery improves.”
“Like so much economic news at present, there is enough here to suggest to the optimistic that this is further evidence of a recovery which is well underway, whilst the pessimistic will feel that there is little room for complacency.”
If you require any further information or assistance on insolvency matters please contact Paul Formby in the Dispute Resolution team on 0844 391 5858.