What are the key findings?
Even though the latest company insolvency figures are from September, it will be Halloween in a couple of weeks and one part of them reminds us of a popular horror movie trope.
The bit where a seemingly lifeless hand starts to twitch with faint movement before one or two of the fingers begin to recover feeling and move of their own accord.
There’s some movement within the figures that has been missing in previous months.
While nowhere near what the average figures for corporate insolvencies should be or have been at this stage of the year, it indicates that company insolvencies could finally begin their overdue and expected rise.
A total of 926 corporate insolvencies were recorded in September – a rise of 148 from last month although they’re still 39% down on the same period last year.
This number is made up of 742 Company Voluntary Liquidations (CVLs) (up from 586 last month); 44 Compulsory Liquidations (down from 66 last month); 109 administrations (down from 110 last month) and 31 Company Voluntary Administrations (CVAs) (up from 15 last month). There were no receiverships.
The biggest move percentage wise was from CVAs that were up more than 50% from the previous month and up 41% from September last year indicating that more companies are choosing this method to protect and restructure their businesses.
One thing to bear in mind however is that when dealing with a low number of cases even a small increase can lead to a distorted increase.
In other categories Company Insolvencies are down 39% from a year ago; compulsory liquidations are down 81%; administrations are down 31% and even though there were 156 more CVLs in September compared to August, they were still 32% down on the total from September 2019.
Another factor influencing the figures was the continuing temporary prohibitions on the use of statutory demands and certain winding-up petitions that began on April 27 were extended to 30th September under the terms of the Corporate Insolvency and Governance Act 2020.
They have subsequently been further extended to 31st December 2020 which will continue to depress the number of corporate insolvencies reported into next year.
The statistics also reported for the first time that two companies had successfully obtained an insolvency moratorium and another had a restructuring plan sanctioned by the court.
Both of these new procedures also came in with the new Corporate Insolvency Act.
The Insolvency Service said: “The low number of cases of each of these new legislative tools since the Act came into force is likely to be as a result of the range of Government support provided to companies including the range of temporary measures that have recently been extended.”
They are careful to avoid recording whether insolvencies are directly caused by the Covid-19 pandemic or subsequent public safety measures that have impacted business as they state it’s impossible to ascertain its direct effect on insolvency case numbers.
CVAs have doubled
Chris Horner, Insolvency Director with BusinessRescueExpert, said: “While overall corporate insolvency numbers are still down it’s interesting to see that CVA’s have doubled from their historically low base last month and CVLs have also increased.
“This is a recognition that despite the circumstances there’s some accessible and useful tools an insolvency practitioner can use to help rescue and restructure a business that can be viable under the right circumstances.
“2020 has been nothing like the right circumstances for a lot of otherwise good firms and through no fault of their own they’ve found themselves facing rising debts with either reduced or halted income.
“Government support has undoubtedly helped many of them keep their doors open but with an uncertain few months ahead, now is the time to start making alternative plans to survive before any more restrictive changes are announced and implemented within days.”
R3 President Colin Haig agrees. He said: “These results show that the toll the Covid-19 pandemic is taking on businesses and consumers may be starting to be felt in the official insolvency numbers.
“Despite the increases, today’s figures are still lower than pre-lockdown levels of insolvency and don’t fully reflect the health of businesses and the economy in the way they would normally.
“The situation remains worrying. The economy is still 9% below pre-pandemic levels, despite growth of 2.1% in August, which shows it has failed to fully recover from the significant contraction in April. We’ve also seen more big brands enter formal insolvency processes, or consider restructuring options, as the delay in returning to pre-pandemic conditions inevitably hampers trading.
“It’s likely that directors of businesses that would have remained profitable had COVID not happened and will see signs their businesses are struggling for the first time ever. We’d urge them to seek advice as soon as these signs appear. The earlier you seek advice, the greater the number of options you have to turn the situation around.”
The sooner you arrange your free initial virtual consultation, the sooner we can start working on a plan to secure your business and give it the best chance of recovery when conditions eventually become favourable again.