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Increase in insolvencies recorded

05 August 2008

Litigation lawyers may have been in greater demand recently, as the number of company insolvencies increased during the second quarter of the year, the latest government statistics have revealed.

According to the Insolvency Service, England and Wales saw 3,560 compulsory liquidations and creditors voluntary liquidations between May and June.

This, the body said, represented an 11.6 per cent increase on the first quarter of the year, while the figure was 15 per cent higher than during the corresponding period in 2007.

However, the number of active companies going into liquidation during the 12 months to the end of the second quarter of 2008 remained at the same level as both the previous three months and the second quarter of last year.

Meanwhile, the Insolvency Service announced this week that three companies based in north Wales had been wound up in the high court after an investigation carried out by its Companies Investigation Branch.

All three firms, which provided timeshare products, were found to have not been in compliance with the Companies Act 1985.

Sarah Jackson, senior associate in the litigation team comments: "We have noticed a steady stream of new instructions and in particular an increase in insolvency related instructions. In this difficult economic climate our advice to clients, both individual and corporate, is that it is important to be realistic with your creditors and not leave matters so late that bankruptcy or liquidation is the only option.

"Certainly, the relatively sudden unavailability of cheap credit following the worldwide credit crunch has impeded many individual's ability to remortgage their way out of financial difficulties. The more striking effect is that many genuinely good businesses with short term cash flow problems have found it difficult to raise finance to expand which has inevitably had an affect on the company's continued viability."