Contributed by MHA Larking Gowen
19/05/2020 - MHA Larking Gowen
A recent report from the Insolvency Service shows that the number of corporate and personal insolvency cases is down. The current economic downturn is affecting local businesses but the advice from the Insolvency and Recovery team at MHA Larking Gowen is not to panic, seek advice and consider your options. As well as dealing with a number of insolvency cases the firm has seen an increase in enquires from company directors on the options available to them.
The reporting on the latest corporate and personal insolvency statistics for the quarter January 2020 – March 2020. The report shows that the total number of company insolvencies in Q1 2020 decreased by 8.5% from Q4 2019 and decreased by 8.5% from the same quarter in the previous year. The report also shows that there were 768 bankruptcies where the individual was self-employed, a decrease of 10.5% on Q3 2019 and 15.5% lower than the same period last year. A more detailed analysis of formal insolvencies reveals there have been significant reductions in formal insolvency appointments since the lock down in late March 2020.
Andrew Kelsall, Insolvency and Recovery Partner at MHA Larking Gowen, said, “We’ve been dealing with a number of Insolvent Liquidations but not the number you would perhaps expect during the current economic crisis. Clearly there will be some cases where there are pressing needs and good reasons to enter into an insolvency now and we’re working with directors on some of those cases. However, a big part of our support now is around advising company directors who are unsure about what they should be doing next”.
“It is important not to panic and rush into an insolvency, reversing out of it may be impossible if you have a change of mind in the future”.
Below are Andrews’s top three tips to consider before making any decisions:
Reduce costs – if trading has ceased, or significantly been reduced, due to the COVID-19 restrictions, then look at all possible costs and whether they can be reduced, furloughing staff, including directors, look at the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loans for funding. Be careful about personal guarantees and restrictions on the use of any such loans.
Review your business – ask yourself this, if your business was viable before the current restrictions were in place then are there any reasons to suppose it won’t be viable again when the restrictions are eased? If so, then that may be the appropriate time to review the business and consider if any assistance is required from an Insolvency Practitioner.
Consider a restructure – during this period of confinement you may well have realised that you can operate in a different and perhaps more efficient way. If this is the case, when we return to the new normal, input from an Insolvency Practitioner might help achieve this via a restructuring of the business.
Andrew concluded, “Basically, don’t panic, we’re all in this together and we don’t have all the answers. None of us know for certain how this will all unfold and taking some time and waiting to see what happens before making significant decisions about liquidating businesses may well be a good decision”.
For further advice visit the MHA Larking Gowen website.
All articles on this news site are submitted by registered contributors of NorfolkWire. Find out how to subscribe and submit your stories here »