Tag Archive | "liquidation"

How many contractor accountants went into liquidation in final quarter of 2011?

The latest company liquidation figures published by the Insolvency Service have been released.

The fourth quarter of 2011 saw a 14% increase in the number of compulsory company liquidations. 4,260 companies went into liquidation in the final quarter; 1,389 of those were compulsory. 191 companies took advantage of voluntary arrangements, 234 called in the receivers and 658 went into administration. Creditors voluntary liquidations stood at 2,871 – a quarter on quarter decrease of 5.1%, but an increase of 3.4% on the comparable quarter of 2010.

Frances Coulson, the president of R3, said time to pay arrangements from the Revenue and low interest rates have created zombie companies that are just managing to keep their heads above water. Some of these companies will eventually sink, she predicted.

She went on to say that current insolvency figures are down on previous recessions and the latest data could represent the “calm before the storm”. In order for an economic recovery to take place, some businesses must fail so that viable ones can thrive.

R3 research shows that 29% of SMEs are experiencing decreased sales volumes and will need additional support this year.

Andrew Dixon from Bibby Financial Services blamed the increase in insolvencies on the lack of available funding. Less than 33% of small business applied for funding from external sources last year, and only 4% took advantage of government run initiatives such as the Enterprise Finance Guarantee of the Business Growth Fund.

He said the latest insolvency figures show that small businesses need more effective support. Businesses are now turning to asset based funding such as invoice finance in a bid to improve their cashflow, because they do not know where else to turn.

He added that government agencies and the financial services industry should work together to develop greater awareness of the funding options available to UK businesses.

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Liquid Photography by Jayashreee

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Disqualification orders against directors continue to rise

Reynolds Porter Chamberlain LLP, the city law firm, has reported that 1,437 disqualification orders were placed on directors of companies, including the clients of contractor accountants, that had gone into insolvency last year, a 4 % increase on the number imposed in 2009.

Five years ago there were only 1,173 disqualification orders but since then 6,422 directors have found themselves disqualified. A disqualification order forbids a director of an insolvent company becoming a director or creating or promoting a limited company for anything up to 15 years.

Company insolvencies reached a peak in the third quarter of 2009 when the UK was in the middle of the economic downturn.

Jonathan Davies, a partner at RPC, commented on the results saying that a disqualification order can be career threatening for a director as the director is unable to set up or participate in the creation of a new business for such a long time.

Administrators and liquidators look to blame somebody when a company goes insolvent and company directors have felt the brunt. There was a substantial increase in insolvencies during the economic crisis and as a direct result we have witnessed this increase in disqualification orders.

The law firm also pointed out that the government has clamped down on corporate governance issues since the start of the recession and company directors should protect themselves by obtaining Directors & Officers insurance. A lot of small firms and limited company contractors forego this cover and end up paying enormous legal costs if their company is investigated.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Certain sectors see a rise in financially distressed firms

It might come as no surprise to contractor accountants to hear that the latest Begbies Traynor Red Flag report shows a 61% increase the number of financially distressed firms in the professional services sector over the past 12 months.

15,526 firms were discovered to be experiencing significant financial difficulties in the first quarter of this year compared to 9,620 in the corresponding period of 2010.

One reason for this increase is the stale corporate deals and property market, according to Begbies Traynor executive chairman, Ric Traynor. He went on to point out that professional services firms operating with a high fixed cost base find it increasingly difficult to cope with the current market conditions as revenues have failed to recover and opportunities to further cut costs have become more limited.

It’s not only professional services firms that are struggling either. Bars and restaurants fared even worse, registering a 68% increase on the Red Flag report, whilst the amount of culture & leisure firms with significant financial problems rose by 60%.

Companies with critical financial problems that are considering insolvency will be distressed to learn that even that option is to cost more. The Insolvency Service has raised the cost of filing bankruptcy proceedings and starting compulsory liquidation.

As from the 1st of June, an individual who wants to file for bankruptcy will need to pay £525, an increase of £75, whilst the charge for a creditor petitioning for a bankruptcy order will need to pay £700 instead of the current £600. Companies entering into voluntary liquidation will need to pay £1,165, a rise of £165.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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