High corporate failure rates among businesses in Yorkshire have led one of the regions leading lawyers to warn struggling companies to address their problems early and not end up in liquidation.
Avoiding liquidation legal experts
Chris Jones, a business recovery partner with national law firm Irwin Mitchell, based at its offices in Queen Street, Leeds, believes a high number of businesses in Yorkshire experiencing difficulties are not fully considering all the avenues open to them, such as administration, company voluntary arrangements, or informal restructuring.
His warning comes as new figures from Experian revealed more than 430 businesses in Yorkshire went into some form of insolvency in the first quarter of 2006, the fourth highest total in the country.
Mr Jones said: The rise in liquidations of nearly 30 per cent shows companies leave it too late to get help and run into the corporate buffers.
These figures suggest a lack of awareness amongst businesses in the region of the turnaround services available, which can effectively lift a struggling company out of the clutches of failure and put them on the road to recovery.
Mr Jones said companies in difficulty can use a turnaround professional or an insolvency practitioner to rescue the business, without the need to put it into liquidation.
Avoiding liquidation advice
He said: By pursuing turnaround options or opting to go into administration instead, the professionals can try to rescue the business or arrange its sale as a going concern, to repay creditors and preserve jobs, a better outcome for all involved.
Leeds United used this format in 2004 when its fortunes spiralled downwards, managing to secure its future with a £30 million takeover by a locally-based consortium. The deal was secured after an agreement was drawn up with its major creditors, allowing Leeds United plc and a holding company to be placed in administration, prior to being wound up. This allowed its assets and reduced debts to be taken over by the team's new holding company, Adulant Force. The club has subsequently been sold onto Ken Bates, the former Chelsea owner.
Mr Jones encouraged businesses in Yorkshire to also consider voluntary arrangements.
He said: This creates an agreement between you and your creditors to repay debts or a percentage of them over a set term. This will help to ease this difficult time for your creditors and go some way to maintaining your relationship with them.
He said the most important thing to do was act quickly if you cannot honour your obligations to staff or creditors. If the problems are caught early, professional advice and a managed solution can help to turn around a company's fortunes.
Mr Jones said: Unfortunately, there are some instances when companies cannot be saved, but the use of turnaround and administration can help achieve better results for your business and your creditors. Liquidation should only be considered as a last resort.
The figures reflect a rise of over 50 per cent in administrations against the same period last year. This suggests the simpler application procedure introduced in September 2003 is popular and banks are prepared to use receivership less.
If you are concerned about the future of your business, the Irwin Mitchell business recovery team can be contacted on 0370 1500 100 or use the drop us a line link above.
Can we help you avoid liquidation? If please visit our Insolvency section.