Trend Away From Administrations And Towards Voluntary Arrangements

A leading insolvency expert from law firm Irwin Mitchell says the latest figures suggest a growing trend towards voluntary agreements in both personal and company insolvencies

The number of companies in England and Wales forced into liquidation fell by a fifth in the second quarter of 2010 compared to the same period a year ago, official figures showed on Friday.

Andrew Taylor, Partner in Corporate recovery team at Irwin Mitchell in the West Midlands, said: "The figures suggest that within the overall fall in corporate insolvency there is a trend away from administrations and towards voluntary arrangements which are considered by some to offer a more constructive approach.

"Fewer administrations doesn't necessarily mean fewer businesses are having trouble because businesses seem to be more willing to get into discussion about their financial situations and enlist the help of insolvency practitioners who can assist in coming to an agreement with creditors before it gets too late and is taken out of their hands."

The Insolvency Service said 4,080 companies were liquidated between April and June, a 0.5 per cent rise on the first quarter but down 19.1 per cent on a year ago.

This was made up of 1,169 compulsory liquidations, which are down almost 10 per cent on the previous quarter and down 21 per cent on the corresponding quarter of the previous year.

However there 2,911 creditors voluntary liquidations, which are up 5.4 per cent on the previous quarter and down 18.3 per cent on the corresponding quarter of the previous year.

Additionally, there were 1,311 other corporate insolvencies in the second quarter of 2010 comprising 302 receiverships, 777 administrations and 232 company voluntary arrangements. 

Personal insolvencies edged lower from the previous quarter but were still 5.0 percent higher than a year ago at 34,743. The insolvency figures are not adjusted to take seasonal factors into account.

This was made up of 14,982 bankruptcies, which were down 20.6 per cent on the corresponding quarter of the previous year.

There were also 13,466 Individual Voluntary Arrangements (IVAs), which were up 10.2 per cent on the corresponding quarter of the previous year; and 6,295 Debt Relief Orders (DROs).

Taylor said: "On the personal front, IVA's and debt relief orders have increased whilst bankruptcy orders have gone down. The figures seem to mirror the trends for businesses with people showing a greater inclination to stay out of bankruptcy and use consensual procedures as well the fact that more people at the lower end of indebtedness are going for DRO's rather than bankruptcy."