Commenting on data relating to corporate insolvencies, Simon Underwood, business recovery partner at accountancy firm, Menzies LLP, said:
“The number of corporate insolvencies in England and Wales decreased in Q3 (compared to the previous quarter) and the figures are 39% down on the same quarter last year. Rather than taking the decision to initiate insolvency proceedings, hard-hit businesses have been attempting to ride out the pandemic by relying on support measures such as HMRC deferments, the furlough scheme and Government-backed loans.
“However, some important changes affecting the insolvency landscape could force more difficult decisions in the months ahead. The 1st December will see the return of ‘Crown preference’, which means that, in the event of a business insolvency, certain HMRC debts will be payable ahead of bankers and unsecured creditors. For directors of businesses that are experiencing cash-flow difficulties, this could make it harder to secure loans and could also result in an increased exposure under personal guarantees if insolvency proves unavoidable.
“The recent removal of the ‘wrongful trading exemption’ (one of the temporary measures introduced earlier this year as part of the Corporate Insolvency and Governance Act 2020) could also put pressure on directors to close businesses to avoid potential liability.
“The pressure is mounting on directors and with the tiered restrictions threatening continued disruption through Q1 2021, a surge in corporate insolvencies may now be unavoidable.”
This was posted in Bdaily's Members' News section by Menzies .