Creditor’s Voluntary Liquidations

• Advertisements for the appointment of a liquidator increased by 5% from 1,224 in July 2021 to 1,286 in August 2021.
• The year-on-year figures for the appointment of a liquidator increased by almost 80% from 717 in August 2020 to 1,286 August 2021.

Administrations

• Advertisements for the appointment of an administrator increased by 10% from 53 in July 2021 to 58 in August 2021.
• The year-on-year figures have reduced by a third, from 102 in August 2020 to 67 in August 2021.

Compulsory Liquidations

• Advertisements for the making of a Winding Up Order increased by 25%, from 34 in July 2021 to 43 in August 2021.
• The year-on-year figures show a reduction of some 60% from 103 in August 2020 to 43 in August 2021.
• The number of Winding Up Petitions being advertised in The London Gazette in August 2021, 39, was considerably lower than in July 2021, 65. They still remain significantly lower than in August 2020, 62.
• As a result of the UK Corporate Insolvency and Governance Act the Courts were unable to make a Winding Up Order on a petition presented between 27 April 2020 and 30 September 2020 unless it could be proved that the debtor was in financial difficulties irrespective of Covid-19. The deadline of 30 September 2020 has been extended on a number of occasions, the last one to 30 September 2021. It has now been confirmed that this deadline will not be extended again and therefore creditors are free to issue Winding Up Petitions from 1 October 2021.

Despite the continuing support for businesses, insolvency numbers have been rising at a fair rate since January 2021 and Creditors Voluntary Liquidations have exceeded pre Covid levels from June 2021.

We suspect that this is the beginning of the natural correction as a result of the artificially low numbers of insolvencies in the first 12 months of the pandemic. Businesses will continue to be supported by Banks and HM Revenue & Customs.

Whether or not we see a sharp increase in the numbers is dependent on a number of factors:

• The Furlough scheme will be withdrawn entirely at the end of the month. Whilst this scheme has been a success and has preserved jobs, the latest statistics issued by the Government show that over 620,000 businesses still had staff on Furlough in May 2021. Given that the country has been freed from all restrictions since then we would assume that the figures over the last few months will have reduced considerably. Only time will tell if this scheme has been masking a problem or whether companies were simply taking advantage of the scheme as a cost cutting exercise and have been managing on lower staff numbers until the support is withdrawn.
• The re-introduction of winding up petitions from 1 October 2021. Until now, creditors have had very few weapons in their armoury to force a debtor to make payment and, to a certain extent, have not needed to, as debtors have had additional borrowing to pay their trade suppliers. Our creditor services clients saw record low levels of bad debts from insolvencies in the first 15 months of the pandemic however these numbers are beginning to rise once again. We would therefore assume that the number of petitions being issued will begin to rise once again however, possibly not to pre pandemic levels as a new minimum debt level has been introduced. The petition debt must now be at least £10,000, temporarily increased from £750. The timing will be dependant on how quickly the Courts can deal with the petitions.
• Business Confidence. The impact of Covid, both financially and mentally, will be felt for years to come. Do business owners have the strength to battle through an unknown period of recovery whilst potentially having higher costs by way of increased staffing costs, repayment of recovery loans and HMRC Time To Pay Agreements?

If you have any clients that have any concerns about the future of their business, we urge them to seek professional advice as early as possible. This will allow to access the widest range of options and give them more time to decide how they will move forward. We offer confidential and independent advice with initial consultation free of charge.

In the unfortunate event that liquidation is required, we offer a low-cost liquidation service for companies with no assets and limited creditors. Our fee is fixed at £3,000 to include disbursements and VAT.

Solvent Liquidations

The number of Members Voluntary Liquidations since the pandemic have been significantly higher than in previous years possibly due to directors deciding to bring forward their retirement plans as a result of the uncertainty caused by the pandemic.

If you have any clients that are considering closing their business and retiring and require a solvent liquidation, we offer a low-cost fixed fee of £1,500 plus disbursements and VAT for straight forward cash distributions.

If you or your clients would like to discuss any issues arising from this article or any other insolvency issue then please do not hesitate to call us on 01246 959388.