The Insolvency Service has released the latest figures for March 2024, shedding light on the insolvencies in the UK. Here’s a breakdown of the numbers:

Registered Company Insolvencies Breakdown:

In March 2024, a total of 1785 company insolvencies were recorded, with the following distribution:

• 1436 Creditors Voluntary Liquidations
• 228 Compulsory Liquidations
• 112 Administrations
• 9 Company Voluntary Arrangements

Yearly Comparison of Insolvency Types:

Comparing March 2024 with the same month in the previous year reveals a notable decrease. There’s been a 28% fall in insolvency cases, with March 2024 witnessing 685 fewer cases than March 2023.

Changes in Insolvency Types Year On Year:

• Compulsory Liquidations: Decreased by 25% 📉
• Creditors Voluntary Liquidations: Decreased by 29% 📉
• Administrations: Decreased by 23% 📉
• Company Voluntary Arrangements: Decreased by 31% 📉

Month-on-Month Comparison:

In March 2024, there was a 17% fall in insolvency cases compared to February 2024, marking a significant decrease of 322 cases.

Month-on-Month Changes in Insolvency Types (February to March Comparison):

• Compulsory Liquidations: Decreased by 3% 📉
• Creditors Voluntary Liquidations: Decreased by 18% 📉
• Administrations: Decreased by 30% 📉
• Company Voluntary Arrangements: Decreased by 25% 📉

Upcoming Insights:

The industry-specific insolvency statistics for the construction industry in March will be released next month. However, for the month of February, 350 insolvency cases were registered across all industries.

Although the statistics show a positive decline in the number of insolvencies, it is still just as important to keep monitoring and reacting to changes within your customer database. In today’s dynamic business environment, staying proactive in monitoring and addressing potential risks is essential for sustaining long-term success. 

If you wish to discuss how our prevention toolkit can support your business, then please call our member support team on 01527 518800 

Our specialised focus on the construction industry and access to exclusive trading experience data make us an invaluable resource for companies operating in this sector.

Offering real-time trading experience data shared by our members, updated minute by minute Top Service delivers the most relevant and insightful information to help you understand potential customers’ payment behaviour. Enabling you to make the best & most informed credit decisions for your business.

Our data provides valuable insights including: whether you can expect to be paid on time, late, not at all or even whether you should expect disputed claims. Or crucially if your potential customer is approaching your business because they are on stop elsewhere.

This is the real life experience from Louise Cain, Credit Manager at Sydenhams Timber & Builders Merchant:

“Recently, when assessing a potential customer seeking a credit account, our primary provider’s data seemed satisfactory at first glance. However, upon cross-referencing with Top Service’s industry-specific insights, a completely different picture unfolded. This led us to decline the credit account, potentially saving our business £10,000. This is why we love using Top Service. Their unparalleled industry-specific information enables us to make well-informed credit decisions, safeguarding our business against bad debt risks.”

We have been protecting the Construction industry and minimising our members exposure to bad debt for over 30 years!

Pre-pack administration is a formal insolvency procedure that enables the quick sale of a struggling business as a going concern. 

In this process, the sale of the business is agreed prior to the administrators formally being appointed. While the buyer can be a third party, it is not uncommon for the existing director/directors to operate under another limited company. 

While pre-packed administration aims to preserve the value of the business, assets, jobs, and work in progress, it’s not always favoured by creditors. Some perceive it as directors retaining assets without fulfilling creditors obligations.

For Creditors, pre-packed administration presents a mixed picture. While it offers a swift resolution, some may feel excluded from the process and have limited opportunities to contest it.

Once a decision is made to pursue a pre- pack, an insolvency practitioner will assess the company’s asset’s value and ensure the buyer has the necessary funds. The business is then put up for sale, with creditors being paid from the proceeds.

Despite controversy, pre-packed administration can be a lifeline for struggling construction businesses. However, it’s imperative for all involved parties to adhere to regulations and maintain transparency to ensure fairness.

A “going concern” denotes a business assumed to meet its financial obligations without imminent liquidation. It typically refers to a foreseeable future period, usually at least the next 12 months or the specified accounting period.

A message to Top Service members from Emma Reilly FCICM, CEO at Top Service Ltd & Credit Expert

A phoenix company is described by the Insolvency Service as the practice of carrying on the same business or trade successively through a series of companies where each becomes insolvent in turn. Each time this happens, the insolvent company’s business (but not its debts) is transferred to a new, similar ‘phoenix’ company. The insolvent company then ceases to trade and might enter into formal insolvency proceedings. 

Companies fail for many reasons and it is not always due to misconduct. For this reason the law allows business owners, directors and employees to set up new companies and carry on a similar business. 

Phoenix companies are not usually favoured by trade creditors and it’s easy to see why. It may seem that a director is walking away from an insolvent company to a new company free of the burden of any debt and the creditor may receive little return once the insolvency proceedings are over. 

In some cases creditors may benefit from the sale as a new healthier company eager to trade successfully and may pick up the contracts the insolvent company left behind, potentially forming a stronger trading relationship with creditors. 

Without doubt the phoenix company process can be exploited and we spoke to James Linton, Head of Creditor Services PKF Littlejohn Advisory who explained the potential penalties to directors found guilty of misconduct in relation to a phoenix company. “If a sale takes place to a successor company prior to and outside of a formal insolvency procedure, then the Official Receiver or an insolvency practitioner will have a duty to investigate it. If they find assets transferred / sold at an undervalue or director misconduct, then they have the powers to undo and reverse transactions, look to reclaim assets, and look into the conduct of the directors who may then become personally liable for the company debts.”

There are certain rules in these circumstances that should be followed and they include:

What’s crucial to note is that this process is not illegal as long as certain rules are followed:

• Director Qualifications: The director must not be disqualified or bankrupt.
• Fair Asset Valuation: Assets must undergo professional valuation, and a fair market value must be paid.
• Personal Funds: Assets must be purchased with the director’s personal funds.
• Transparent Marketing: A variety of marketing methods must be employed to advertise the pre-pack sale.
• Creditor Notification: Creditors must be informed of the pre-pack sale in a timely manner.
• Full Disclosure: The insolvency practitioner must provide a full disclosure of all actions taken.
• Director Investigation: Directors must undergo a thorough investigation to ensure transactions were in the interests of creditors.
• Company Name: The new company name must not mislead the public or creditors.

For more information on phoenix companies, check out this link provided by the Insolvency Service. Phoenix companies and the role of the Insolvency Service – GOV.UK (www.gov.uk)

The Director Monitoring Service allows you to keep track of who is running the companies you are dealing with. You will receive alerts when a director resigns or is appointed at another company, providing valuable insights into leadership changes within your business network.

When a director resigns, it can present challenges such as knowledge loss and transitional risks, but it also offers opportunities for fresh perspectives and new leadership that could benefit the business in the long run. 

Understanding both the positives and negatives of such transitions is crucial for assessing their impact on a company’s operations and future prospects.

Changes in leadership can sometimes result in alterations to credit limits, impacting the financial stability of the business.

Resignations and new appointments aren’t always a trigger for something negative happening. It’s essential to consider the history and background of the departing director. 

If the Director has been associated with companies that have faced insolvency or financial difficulties in the past. This may trigger a potential risk warning that should be investigated. 

Equally directors with a successful track record and experience in managing long-established businesses can bring stability and credibility to an organisation.

Monitoring services provide valuable real-time information that can assist businesses in making informed decisions, mitigating risk, and maintaining healthy business relationships within the construction industry. 

This service is designed to help businesses stay proactive in managing credit risk and staying up to date about critical changes that will impact their trading relationships .

Company monitoring – Top Service members have access to unlimited company monitoring.  Alerts are sent to members detailing changes & updates to key information within a subject company’s credit information. Using this service element along with the combination of credit checking & access to construction industry specific trading experience is a winning combination to minimise risk. 

The monitoring service alerts members by email when specific events occur, such as:

• New trading experiences have been reported
• Changes to in suggested credit limits
• Formal insolvency filings such as winding-up petitions and administration orders,
• New County Court Judgments registered against a limited company
• Changes to the company name
• When a company files new accounts

Thank you to Jo Stevens at Tarmac for your kind words.

Top Service provide Tarmac with an invaluable support for new customer trading history, and early fraud detection. The trading histories enable us to avoid potential late payers, or to identify that a customer has cash flow difficulties

Tarmac, is the UK’s sustainable construction materials, road contracting and building products business. UK supplier of Aggregates, Asphalt, Concrete, Cement, Blocks, Mortar, PAVE Contracting & Recycling Service. Tarmac joined the Top Service community in March 2020  to help manage risk, minimise debt & maximise cash. 

We’re not your average credit reference agency!
 
The unique credit information we gather and our specialism in the construction industry gives our members a competitive advantage over those using one of the generic credit reference agencies.
 
Our insider intelligence is the most relevant credit information available to the construction industry.
 
We have been protecting the #constructionindustry and minimising our #members exposure to bad debt for over 30 years!

Our own industry specific data plays a pivotal role and can lead to credit limits and scores being reduced or removed when other mainstream agencies are still offering substantial limits & scores. 

Our credit limits and credit scores are calculated by taking the opinions of two of the major credit reference agencies and then applying our own industry specific data to produce the most informed, up to the minute and realistic information for the construction industry. 

We are the only credit reference agency, specifically for the UK construction industry,  Our industry specialism ensures our members have the ability to make better credit decisions than they can by only using a mainstream agency, resulting in minimised risk for their business. 

Our team of credit management experts have their ears to ground and hundreds of years of knowledge & experience between them. It’s our industry knowledge that allows our team to react to changes in trading experience patterns, to respond to rumours and concerns within the construction sector. 

Director Resignations – When a director resigns, it can present challenges such as knowledge loss and transitional risks.Changes in leadership can sometimes result in alterations to credit limits, impacting the financial stability of the business. It’s essential to consider the history and background of the departing director. Warning signs may arise if the individual has been associated with companies that have faced insolvencies or financial difficulties in the past, indicating a potential risk factor for the current business.

Group Company Activity – If a company is part of a group structure, its credit limit may be influenced by the financial performance and credit worthiness of other entities within the same group.If one group experiences financial difficulty, it could negatively impact the creditworthiness of the entire group, resulting in a reduction to credit limits for all group members.

Rate of Insolvency within a specific Industry – The industry a company operates in can impact its creditworthiness. If a company is in an industry with a high rate of insolvency, credit reference agencies may view that industry as riskier, potentially leading to tighter credit limits. Overall, while the industry’s rate of insolvency can influence a company’s credit score and credit limit, it is just one of many factors considered by creditors when assessing credit risk.