The rise of Corporate Insolvencies

Solicitor, Tom Taylor explains the recent insolvency statistics published February 2024.

The monthly insolvency statistics published for February 2024 report a 17% year-on-year increase on registered company insolvencies from February 2023 (source: the Insolvency Service).

Corporate insolvencies are formal measures taken when a business can no longer pay its debts. There are a number of different types, but often, the formal insolvency process can be initiated by either the directors of a company, or a petitioning creditor.

For example, of the 2,102 reported insolvencies in February 2024, the vast majority, 1,707 were creditors’ voluntary liquidations (CVLs). A CVL is a director-initiated liquidation process which must be administered by a licensed insolvency practitioner. It is intended to bring the company to a close and deal with outstanding company debts as part of the process. Directors of the company should seek advice as soon as any financial difficulty is encountered. This is particularly important given that directors may be held personally liable for creditor losses if they continue to trade whilst knowingly insolvent.

The number of reported insolvencies is greater than pre-pandemic numbers. Worryingly, the number is also greater than the levels seen while the Government support measures were in place. A combination of an increase in interest rates and high inflation has caused businesses to suffer from significant financial pressure over the last year. According to the statistics, this financial pressure appears to be converting into distress in the market.

Kuits act for directors, creditors and insolvency practitioners in respect of corporate insolvencies. If you require assistance, please get in touch. As with all cases, it is important to seek independent legal advice at the earliest opportunity.