Insolvencies on the rise as businesses brace for a tough 2023

Insolvency figures released for December 2022 show that the number of registered company insolvencies in December 2022 was 1,964. This is 32% higher than in the same month last year (1,489 in December 2021), and a substantial 76% higher than the number registered before the pandemic (1,119 in December 2019).  Most of these insolvencies can be attributed to insolvent liquidations.

The rise in corporate insolvencies was anticipated, but the increase on pre-pandemic levels is concerning.  These numbers are widely expected to rise further, and business owners should consider how best to protect their company’s financial position.

Engaging an Insolvency Practitioner will help you to review what action is required, and most importantly, this could secure survival of the business.  At Keywood Group we recommend that company directors think about the following:

• Review budgets

Revisit your budgets and financial projections and ensure they are realistic.  Consider what you reasonably expect to make in terms of sales and allocate budgets against all operating costs (such as your direct costs, insurance, marketing, payroll, premises and professional costs).  Periodically review these forecasts and if actual figures are far from your original projections, consider why, and act upon this information.  Also take the opportunity to cut back on any unnecessary expenses. 

• Dealing with overdue Invoices

Unpaid invoices have a negative effect on any business.  If payments regularly exceed the agreed terms, then you may want to charge interest for any period over and above that.  If a long-standing customer is struggling, it might be appropriate to take a more lenient approach but be clear on your position.

• Reviewing funding

There are many ways to get business funding, ranging from start-up loans, traditional bank loans, factoring, or peer-to-peer lending.  Always be mindful that some of these options may require commitment from you in the form of a personal guarantee.

• Review management accounts

Where possible, keep management accounts on a monthly or quarterly basis. These should help you to identify specific concerns at an early stage and enable you to take professional advice where necessary. 

What should I do if my business is struggling?

If your company is struggling the most important thing to do is seek advice.  By speaking to a Licenced Insolvency Practitioner, you can work together to establish whether the problem is temporary, or whether more formal action is required.

An Insolvency Practitioner is best placed to provide advice on all the options available, even if an informal solution would be best.  However, if the problems are too significant and the company cannot survive, an Insolvency Practitioner can explain what course of action is the most appropriate in those circumstances.

Company Voluntary Arrangements

A CVA is a binding contract between a company and its creditors to pay back some, or all, of its liabilities over a specified period.  This would only be appropriate where the business itself would be viable if it was not so heavily indebted.  A CVA is usually for a term of five years, and once the arrangement concludes, any remaining balance of unsecured debt is written off.  You can read more about the CVA process, here.

Administration

Administration is a useful process which protects a company from creditor pressure and provides an automatic stay on any current or pending legal actions.  It will usually facilitate the rescue of the company, or the sale of its business and assets on a going concern basis.  Administration must achieve a specific purpose and you can read more about the Administration process, here.

Company Closure

Unfortunately, in many cases you will need to consider whether the company should be wound-up (formally closed). Voluntary liquidation is a formal insolvency procedure formally known as Creditors Voluntary Liquidation (CVL).  As part of the CVL process, all assets belonging to the company will be identified and sold for the benefit of the liquidation process.  You can read more about company closure, here.

Help from a Licenced Insolvency Practitioner

Keywood Group are a firm of Licenced Insolvency Practitioners with offices in Birmingham and London.  Our team has over 20 years’ experience in advising businesses on their options and dealing with company closure.  Our experienced team will work with you to assess the options available and guide you through the process. 

If you want further information, please contact us for a no obligation chat.