Company debt recovery remains as vital as ever. The final quarter insolvency statistics were released at the end of January and complete the records for the 2021 calendar year.
The statistics show that the number of company insolvencies are starting to creep up again. Company debt recovery should be a crucial function of any business that gives credit to its customers.
It is important to understand that there are different types of insolvency procedure and different reasons for why that particular insolvency process happened. Some are instigated by the insolvent company itself and some are forced. In particular, the number of compulsory liquidations crashed to an all-time low during the pandemic because the government effectively outlawed winding up petitions except in very limited circumstances. Therefore, companies making other companies enter liquidation, because they were owed money, was put on hold.
In the whole of 2021 there were only 475 compulsory liquidations. Pre-pandemic, there were around 3,000 compulsory liquidations each year.
Likewise, the number of administrations decreased during the pandemic, presumably because companies felt less pressure to investigate formal insolvency processes due to the lack of pressure creditors could put on better companies because of the inability to issue a winding up petition. Administrations totalled 796 in 2021, whereas pre-pandemic they were around 1,500 a year.
The number of voluntary liquidations dipped in 2020 but have now gone to record levels for the past 5 years. A voluntary liquidation is where the company itself (via it’s officers) decides to put the company into liquidation. This trend is likely because the pandemic has caused such businesses financial distress and that now the government financial support has ended they find themselves with a business that is unviable and which needs two to come to an end. In 2020 the number of voluntary liquidations fell to 9.491 and in 2021 increased to 12,661. We anticipate these will go up further in 2022.
Company voluntary arrangements (CVAs) have also taken a dip and remain at an all-time low for the past 5 years. They dropped to 155, from an average of around 350 per year. We anticipate that those figures will go up significantly in the next year or two as a CVA allows a company to continue trading out of insolvency by terms being reached with the creditors to enable it to keep trading and for the creditors to receive monies during the life of the CVA. It is necessary for a CVA to be approved by the creditors and generally, to achieve that approval, the terms of the CVA need to demonstrate that it will result in a better outcome for the creditors than if the company entered into liquidation.
The statistics show that company debt recovery remains a crucial function of all successful businesses given that the restrictions on insolvency procedures have now been lifted and many companies find themselves in a difficult financial position.
You can access the statistics here.
Summary – The Continued Importance Of Company Debt Recovery
You don’t want to be one of the creditors who finds itself having granted substantial credit only not to get paid because the customer cannot afford to pay and goes bust.
We encourage you to look at our training courses which teach you how to use the courts to get your outstanding invoices paid. If you have any queries at all please do not hesitate to get in touch.