Company Insolvency Risk Increases

I haven't blogged for a while - the simple reason for this is I've been REALLY busy! Every silver lining has a cloud so whilst it's good for me as an Insolvency Practitioner, it's not so good for others.

A recent article in Accountancy Age (here) backs up the increase in work I've been seeing. The statistics for insolvencies for Q1 2011 will be published around 6 May 2011 - they will make interesting reading. I have no doubt they will follow the typical pattern of the UK economy coming out of a recession in terms of an increase in failures.

I've been doing a lot of advice and more informal (non-Insolvency Act 1986) work for companies that are buckling but not yet on their knees. One of the useful services we offer is carrying out a snapshot review of a company to see what insolvency risks there are. At ipd this is called a "Financial and Options Review" and more details on this can be found here. A typical review will take 2-3 days and the results are available in a very short time so that problems can be sorted quickly.

Essentially the review gives an independent view of the financial state and health of a company, which can often differ from the view held by the directors - it's a very useful tool to give them a better perspective on what is actually happening and allows them to see what the problems are that need addressing. Very often a director will not recognise that there is a problem already or one that may be looming in the very near future and therefore hasn't taken steps to deal with it. It will also provide them with advice on the risks of potential personal liability if the company is insolvent.

The review is also very useful for any company that is experiencing difficulties with its funding requirements, e.g. in terms of maintaining an overdraft facility or wanting an increase. On the basis that the review shows that the company is actually in reasonable or good financial health, the fact that an Insolvency Practitioner (cynical creatures that we can be!) has looked at it and given it a clean bill of health can be reassuring for a Bank or other lender in terms of continued or additional support for the company.

Whilst 90% of the time an Insolvency Practitioner will only be called in at two minutes to midnight, asking him to visit at 11.30pm will often yield surprising results! We don't bite really!!