Tony Mitchell
Managing Director
02476 553700
Business Rescue & Insolvency Newsletter
Are we, Aren't we?
Is there a recession looming or not? Well the answer very much lies on who you are speaking to. Accountants report that they have never been busier and that they have many clients who are doing well, but speaking to a property developer last week, his feelings are that we are heading for a recession on the scale of the early 1990's.
The truth is no one knows, but as the figures below show, there has been a significant increase in the number of corporate insolvencies during the last quarter compared with the previous quarter, and the same quarter last year. We can report that we are seeing an upturn in activity across all sectors and there is no doubt that retail is finding it very difficult - people are spending more carefully.
Insolvency Latest – Quarter 1 2008, Published 2 May 2008
| No. In Quarter | Change On Previous Quarter | Change On Same Period Last Year |
|
|---|---|---|---|
| Company Liquidations | 3,210 | +2.0% | +4.0% |
| Receiverships | 273 | +85.7% | +145.9% |
| Administrations | 859 | +54.0% | +22.9% |
| Company Voluntary Arrangements | 140 | +53.8% | +40.0% |
| Bankruptcies | 15,651 | +0.1% | -6.8% |
| Individual Voluntary Arrangements | 9,614 | +4.3% | -22.0% |
Source: The Insolvency Service (2 May 2008).
Although company liquidations have remained relatively static as the graph below shows, it is the significant increase in the number of Receiverships, Administrations and Company voluntary arrangements that is the main news this quarter. The marked increase in Receiverships would suggest either that this was older lending with pre Enterprise Act lending documentation that have failed or alternatively there has been a significant increase in the number of Property Receivers appointed.
There were 25,264 individual insolvencies in England and Wales in the first quarter of 2008 and although this is slightly higher than the previous quarter, we have to go back to the first quarter of 2006 to find a small number.
For bankruptcy orders there has been a pronounced shift towards debtor's petition bankruptcies and away from creditor's petitions in recent years. By the first quarter of 2008, 84% were made on the petition of the debtor.
The percentage of bankruptcy orders involving trading debts (self-employed bankruptcies) has fallen from 61% in 1995 to 11% in 2007, although some of this difference is as a result of revised classification.
Individual Voluntary Arrange numbers reversed their previous downward trend although are still 22.0 % fewer than the same period last year. The news coverage about the possible mis-selling of this procedure by certain insolvency practitioner companies continues to have an effect of the number of people entering into an IVA.
Bankruptcy on-line should give concern
I am very fearful over new bankruptcy procedures that could allow those in debt to write off their debts with a click of a mouse button. The Government driver seems to be cost savings.
The Insolvency Service is currently working on proposals relating to Debt Relief Orders ("DRO") which may mean individuals could begin bankruptcy proceedings for themselves, or others, on-line. In theory and depending on the eventual scheme, unscrupulous individuals may be able to use the scheme against people who they have a grudge against or simply who they have had an argument with that day! The "victim" will not know what has happened until they receive a letter.
DROs are aimed at the 'indebted poor', those with little or no assets and no surplus income. They are to be introduced from April 2009 and at present it is anticipated that there will be roughly 20,000 per annum. Those individuals who can make use of DROs have domestic debts of no more than £15,000.
Cranfield news
Our events for 2008 have got off to a great start with the first meetings of both our Golf Society and the March round of the Cranfield Carting Challenge Cup.
Congratulations to Kam Majevadia from Sydney Mitchell, solicitors, for winning the March meeting of the 2008 Early Bird Golf Society at Coventry Golf Club, with 20 stapleford points over 9 holes - the handicap committee has already met!
If you do not already receive the email from Natalie with all the details of the Society's meeting dates, please contact her on 024 7655 3700 or email her at natalie.lagopoulos@cranfieldbusinessrecovery.co.uk.
The March round of the Cranfield Carting Challenge Cup proved to be a fast, exciting and bruising encounter for our Carting teams with Needham & James and Brindley Twist Tafft & James reaching the top spot in their respective races, congratulations.
First Techbite seminar a success
We also held the first of our TechBite LIVE seminars at the Herbert Art Gallery in Coventry on the topic of Directors' Duties and Responsibilities under the Companies Act 2006 and the Traps & Pitfalls that exist in the Twilight Zone. The event was very well attended and we look forward to bringing you more Techbite LIVE seminars throughout 2008.
As part of the launch, the first of our TechBite briefing sheets is now available entitled 'Company Dissolutions - Capital v Income Distributions and the Impact of the Esc C16'. You can pick up a copy from the Cranfield reception or download the briefing sheet (PDF).