Analysis and Commentary on the Insolvency Statistics Q2 2023
The quarterly insolvency statistics for April to June 2023 show that corporate insolvencies across the UK1 are at a 14-year high.
Increased insolvencies appear to be continuing with the monthly statistics for both August and September 2023, showing corporate insolvency numbers were higher than the same month last year. July’s figures showed a slight decrease year on year.
Deciding the parameters of directors' personal liability for actions, or omissions, when a company continues to trade while it is or near insolvent requires a balance to be struck between allowing directors latitude to try to rescue the company and protecting the company's creditors.
Protecting your business from exposure to supplier and customer insolvency
As we move through Q1 of 2023, significant shifts are occurring in the Global financial and economic landscape which are of significant consequence for business. The marked upward shift in the cost (and reduced availability) of finance, largely unseen for over a decade, combined with high energy and natural resource/raw material costs and challenges and currency fluctuations has the potential to sharply to expose financial distress in businesses in many countries and global supply chains.
The rapidly changing impact of COVID-19 on companies and the wider economy presents directors with the unenviable task of balancing the immediate need to secure the survival of their company against the longer-term implications for their stakeholders. In March, the UK Government announced that wrongful trading measures would be temporarily suspended to ease this pressure. The suspension measures are included in the Corporate Insolvency and Governance Bill, which introduces both temporary measures, such as this, and permanent and significant changes to UK insolvency law.
The High Court decision in Re All Star Leisure (Group) Limited (2019), which confirmed the validity of an administration appointment by a qualified floating charge holder (QFCH) out of court hours by CE-Filing, will be welcomed.
The decision accepted that the rules did not currently provide for such an out of hours appointment to take place but it confirmed it was a defect capable of being cured and, perhaps more importantly, the court also stressed the need for an urgent review of the rules so that there is no doubt such an appointment could be made.
In certain circumstances, if a claim is proven, the defendant will be able to offset monies that are due to it from the claimant - this is known as set off.
Here, we cover the basics of set off, including the different types of set off and key points you need to know.
What is set off?
Where the right of set off arises, it can act as a defence to part or the whole of a claim.
In our update this month we take a look at some recent decisions that will be of interest to those involved in insolvency litigation. These include:
Creditor not obliged to take steps in foreign proceedings to preserve security
No duty of care owed for negligent bank reference to undisclosed principal
The Supreme Court has held that a bank which negligently provided a favourable credit reference for one of its customers did not owe a duty of care to an undisclosed principal who acted on that reference.
There has been a series of high profile tenant company voluntary arrangements (CVAs), particularly in the retail and casual dining sectors. Many landlords have been hit by closure of underperforming stores, and by rent cuts on those remaining open. Here we outline ten points for landlords on what CVAs are, how they are entered into and what landlords can do to protect themselves.
What is a CVA?
A CVA is a statutory process, supervised by an insolvency practitioner. It allows a company in financial difficulty to: