Business insolvencies in England and Wales at a 60-year high
Company insolvencies remain high and voluntary insolvencies in England and Wales reached their highest level for 60 years in the first quarter of 2023. Creditors Voluntary Liquidation (CVL) was the most common insolvency procedure relating to corporate insolvencies (82%), followed by Compulsory Liquidation (11%).
These statistics indicate that whether voluntary, or not, many companies have been unable to avoid liquidation and many SME’s face tough decisions about their future.
For business owners in Birmingham and the Midlands, the figures are particularly concerning as the figures show regional disparity. In the North East and West Midlands company closures increased by approximately 49%, compared to the increase of 19% in London. With the cost-of-living crisis, high inflation and lasting indebtedness from the previous years, many more businesses will find it difficult to continue trading. So, when should you seek advice from a Licensed Insolvency Practitioner?
Warning signs of financial strain
There are many early warning signs that indicate that your company is experiencing financial difficulty. These include struggles with cash flow, creditor pressure, reduced profit margins, or high levels of debt compared to equity. In some cases, an unhappy workforce can also be a sign that a company is not performing well, and therefore unlikely to retain key staff.
Being aware of these signs and knowing what action to take could help you to prevent further losses, or your company becoming formally insolvent. The most important thing to do is seek advice from a Licensed Insolvency Practitioner, before the position deteriorates. By speaking to a Licensed Insolvency Practitioner, you can establish whether the problem is temporary, or whether more formal action is required. If the problems are too significant and the company cannot survive, the Licensed Insolvency Practitioner can explain what course of action is most appropriate.
What is Creditors’ Voluntary Liquidation?
Creditors Voluntary Liquidation (CVL) is usually an appropriate solution when a business itself has no viable future and must cease trading. The procedure can be instigated by the directors of an insolvent company, if the shareholders agree that the business should cease trading.
Once it is resolved that the company should enter CVL, a Liquidator will be appointed by the shareholders and creditors, and company assets will be sold to repay its debts. The Liquidator must be a Licensed Insolvency Practitioner who will facilitate the formal wind down and will also prepare and file all the necessary documentation, ensure that the winding up is fully compliant with the current legislation.
Benefits of a Creditors Voluntary Liquidation
✓ Allows employees to claim redundancy pay and unpaid wages from the Government
✓ Prevents creditors from taking action
✓ Provides directors with comfort in dealing with their choice of liquidator
✓ Reduced costs, compared to the likely costs of other insolvency processes
As always, careful consideration must be given to all options available.
Help from Licensed Insolvency Practitioners
Keywood Group are Licensed Insolvency Practitioners with our head office in Birmingham, although we cover the whole of England and Wales. Our team has extensive experience dealing with businesses and our Insolvency Practitioner is fully licensed and regulated by The Insolvency Practitioners Association.
If you are concerned about the viability of your company, please contact us for a no obligation consultation. We provide clear, transparent advice and work closely with all directors to reach the best possible outcome for your business.
