It depends what you mean by trend.
Fashion is a difficult concept to get your head around.
In that regard it’s more of a feeling.
Nobody declares that something is a trend – it has to be a behaviour or action that several actors are following at the same time, others will then see it and emulate it and then it builds out.
So it sometimes is in business and when you’re running a company. You will read or notice something that several other companies and competitors are doing and before you know it – you decide to do it too.
What does this have to do with administration?
Well, in the latest official monthly insolvency figures released this week for March 2023 – there are several important trends that are apparent.
Company insolvencies are at their highest monthly level since they started being reported this way in January 2019.
Also creditor voluntary liquidations (CVLs) have reached their highest level with so many being recorded that there have only been three other months that have seen more total insolvencies than CVLs in March.
Which brings us to the 145 administrations recorded last month.
On the surface this might not seem like a huge number compared to CVLs and makes up 6% of all insolvencies recorded last month, but it is the largest number of administrations recorded in a month since December 2020.
It was a 26% increase on last month’s total of 108 and a 12% annual increase.
The trend of these numbers is upward – they have increased every month this year – which shows that more directors are deciding that their company can be restructured and eventually emerge stronger than before and that insolvency practitioners agree with them.
How can administration save your business?
Administration is a formal insolvency process that puts a company under the temporary oversight of an external administrator to see if savings can be made to stem immediate financial losses, stop all pending and live legal actions against the business and see if the company can be turned around.
It could even be sold to new buyers or internal management could buy out control and run it themselves.
Ultimately, an administrator’s job is to protect the interests of the creditors the business owes money to. Their financial interest is paramount but if the company can be returned to profit then there is more chance that they will receive 100% of their arrears from a viable business.
If this scenario doesn’t play out then the business can be closed (through a CVL most likely) with assets sold to obtain the best possible deal for the creditors.
Note – you can’t just decide to put your company into administration. It has to be done by a licensed insolvency practitioner and agreed by directors.
Our animation explains the process a little more:
Chris Horner, insolvency director at BusinessRescueExpert, said: “I might be the last person to comment on fashion trends but I know business trends and the increasing number of administrations in 2023 is one of the most underreported.
“The unprecedented last three years have changed the landscape and rules for a lot of businesses especially when it comes to insolvency with many directors simply unable to see a path forward for their companies where there otherwise might have been a path.
“The fact that more now see administration as a reasonable way to preserve then power up their firms once more rather than liquidate them outright shows that maybe for some companies, the worst conditions have passed and administration is once again the way to go.”
If your business is struggling but you have some practical ideas on how to make it grow to give it a new lease of life then an administration might be a realistic option to consider.
We offer a free initial consultation for any business owner or director who wants to discuss the circumstances their company faces in more detail and explore what options are available to them.
It might be that administration isn’t the best choice and there might be other avenues to explore but after a conversation with one of our expert advisors, they’ll thoroughly understand why and be able to make that decision informed of all the options available to them.
Get in touch today and make that decision sooner.