Corporate Insolvencies down by 41% despite global pandemic

The insolvency service has released their monthly insolvency statistics for November 2020. The results are unexpected.

On the 15th December, insolvency service released the November 2020 figures for UK insolvencies. What’s most surprising is that the figures are down 41% compared to November 2019. Bounce back loans, CBILS scheme, furlough, and an extension of the restrictions on winding up orders are likely to have played a big part in the statistics but what this does mean? There likely to be a large influx of limited companies needing insolvency advice.

Here at The Directors Helpline, we specialise in advising directors of small and medium sized businesses. We have a clear remit to provide expert and accurate information to company directors during this unprecedented global pandemic.

Below are the findings from the Insolvency Service.

Insolvency is down by 41% despite global pandemic

Company Insolvencies in November 2020

There was a total of 889 company insolvencies in England and Wales, comprised of 767 creditors’ voluntary liquidations (CVLs), 34 compulsory liquidations, 73 administrations and 15 company voluntary arrangements (CVAs). There were no receivership appointments. The overall number of company insolvencies decreased by 41% in November 2020, when compared to the same month last year. This was primarily driven by a decrease in the numbers of CVLs and compulsory liquidations which fell by 28% and 88% respectively.

The number of companies entering administration in November 2020 also fell when compared to the same month last year by 51%. CVAs fell by 29% in November 2020 in comparison to the same period last year. Company insolvencies in November 2020 fell by 41% compared with November 2019 numbers England and Wales, November 2019 to November 2020, not seasonally adjusted. The overall reduction in company insolvencies was likely to be in part driven by the range of government support put in place to financially support to companies in response to the coronavirus (COVID 19) pandemic.

The government also announced in late April that it would temporarily prohibit the use of statutory demands and certain winding-up petitions from 27 April to 30 June 2020 under the Corporate Insolvency and Governance Act 2020. This was later extended to 30 September, and again further extended to 31 December 2020. Between the 26 June and 30 November 2020, four companies obtained a moratorium, and two companies had a restructuring plan sanctioned by the court. These two new procedures were created by the Corporate Insolvency and Governance Act 2020.

The low number of cases of each of these new legislative tools since the Act came into force is likely to be as a result of the range of Government support provided to companies as mentioned above, including the range of temporary measures that have recently been extended for a further period.