Insolvencies set to rise in Northern Ireland

Insolvency levels in Northern Ireland have been lower than usual in recent times however the reintroduction of Creditors Winding Up Petitions for the first time since the pandemic is likely to result in increased activity in the coming months, says FPM’s Seamas Keating.

During the pandemic bankruptcy and winding up petitions were suspended in Northern Ireland with the result that creditors, including HMRC, were unable to bring winding up petitions. This reduced pressure on distressed businesses and resulted in fewer companies entering insolvency. However, bankruptcy petitions resumed in Autumn 2022 and, more recently, guidance released by the Bankruptcy and Companies Masters Court indicated that the Court will allow creditors to issue winding up petitions from Monday 17 April, 2023. The opening of the Courts is likely to stimulate increased insolvency activity.

Insolvencies in England and Wales

Unlike Northern Ireland, winding up petitions have been active for some time in England and Wales. The latest Insolvency Service statistics show a significant rise in insolvency activity in 2023 when compared to 2022 and are an indication of what we may expect in Northern Ireland in the months ahead.

Company insolvencies in England and Wales were 17% higher in February 2023 than in the same month last year, and 33% higher than pre-pandemic in February 2020. Compulsory liquidations in February 2023 were more than twice the level in February 2022 due to HMRC issuing more winding up petitions. Creditor voluntary liquidations were 13% higher than in the same last month last year suggesting more directors have been opting to cease trading.

The main business rescue and restructuring options—Administration and Company Voluntary Arrangements (CVAs)—continue to experience lower activity than before the pandemic which may be due to the ongoing impact of HMRC’s preferential status making the rescue processes more difficult to facilitate and implement.

Implications of rising insolvencies for company directors

The landscape for company directors has changed significantly since the pandemic making it more important than ever for directors of companies in financial distress to seek advice from qualified insolvency professionals. Reports of directors facing disqualification and other sanctions for abuse of the Government’s COVID support schemes and loans mean that this is an area that is likely to be heavily investigated during the insolvency process. There will also be companies who have continued to trade whilst insolvent and directors’ conduct in this period of trading will be scrutinised. The earlier companies and directors take advice, the more options they will have to rescue or restructure their business.

Get in touch

If you have any questions regarding restructuring and recovery, contact Seamas Keating on s.keating@fpmaab.com

Join us

Date: Thursday 27th April

Time: 10am – 11am

Topic: Assisting your clients in financial difficulty

FPM Restructuring & Recovery Partners Seamas Keating and Gary Digney have created a webinar specifically for professional advisors supporting clients who may be facing financial struggles. So, if you are a Solicitor, Practicing Accountant, Consultant or Financial Advisors, this event is for you.

The team will spend time looking at the tell tales signs, offering practical tips and solutions for each circumstance, that will leave your clients in a better position to move forward.

In 2023 we have already seen rising insolvencies, the pending re-commencement of winding up petitions in Spring 2023, higher interest rates, rising inflation, cost of living increases and the significant impacts of pandemic debt, making this the ideal time to seek out support and expert advice that can assist your clients facing financial difficulty.

To register for the event, click here.