In an unusual twist on the current economic conditions (you might think that Insolvency specialists are in on eof the only sectors which should still be thriving) Bond Partners LLP, a firm which had offices in both London and the Midlands, has gone into administration.

Another feature of this situation is that, with an administration, certain assets of the business, principally with a professional services firm it’s work in progress, can be sold, and it’s no great surprise that in this case, assets have already been sold. Controversy abounds with administrations in that another feature of some administrations is that some or all of the individuals who had some management or ownership role in a business which leaves debts owed t0 creditors which won’t be paid,  end up buying the assets and in this case it appears that the work in progress was sold to former members of Bond Partners. To mitigate the anger often felt by creditors in such cases, in this instance the administrators were able to conclude an arrangement whereby a proportion of  fees from the work in progress sold  will be due to the administrators who in turn will distribute those fees, after payment of their won fees and any priority claims, to the creditors.

Think accountants, think financial prudence and a safe pair of hands – yes, but accountants are in business just like all the rest of us, and they are not immune to insolvency, nor are lawyers or doctors and dentists.

Publicity to the large number of solicitor practices which have gone to the wall has been limited, but one case of insolvency in accountant practice has been widely reported in the last week because the practice concerned was a top 50 ranked practice in England & Wales.

The practice in question Target Consulting Group had employed around 200 people with a number of offices around the country, with different functions under an umbrella group.

As with many other administrations, whilst jobs will still be lost, there are some attractive assets within the Group and it seems that some have been sold off already, and the accountancy part of the business, as opposed to corporate finance and other divisions has not had to go into administration at all.

The above shows the value of setting up a group structure of companies such that even if parts of a business are insolvent, others that are not can survive. It also shows that running a business is tough, even for those with significant skill on the face of it, professional training and years of experience. Of course it also demonstrates that with any economic downturn on such a broad scale as we are seeing, it will permeate to all levels of society.

In fact, with solicitors, it is quite noticeable that a number of practices are perhaps good at advising others but when it comes to their own business management skills and decision making, this isn’t so great. Maybe that’s why they became solicitors in the first place !

The recent case of  Finnerty and another v Clark and another [2011] EWCA Civ 858 is very interesting relating to the issue of applications to remove administrators. Those in the insolvency field will already know this is discretionary for the court but is not an easy application to succeed with.

The Court of appeal reiterated that a court of first instance has wide statutory discretion and that to succeed, the applicant does not need to prove misconduct, unfitness, or a lack of integrity by the insolvency practitioner.

The Court went on to emphasise that :-

• There must be “good or sufficient ground or cause for the removal of the administrators and for their replacement by another administrator”. If the application cannot satisfy this test it should not go on to consider it’s statutory discretion.
• In the case in question, the administrators had refused to start legal proceedings to challenge the underlying security in a property transaction. Whilst that application would have been funded by individuals who had given personal guarantees and would have benefitted from a successful challenge by the administrator, the administrator was entitled to refuse to make that application.

The latest half yearly results from Lloyds Banking Group show some quite scary figures.

We are all aware that due to unprecedented cavalier lending in the property sector, exposure by the banks was high. The reckless lending was particularly bad in relation to Ireland which had created numerous property moguls almost out of nowhere. Well, the position continues to deteriorate.

Lloyds figures released this week now provide for a huge  £17bn of impaired Irish loans, which do not look like being paid any time soon. The figure above represents an increase of over £3 billion in the impairment just over the last 6 months as property prices continue to fall in both the UK and Ireland.

These figures are staggering and astronomical and simply remind us of the true madness of the first decade of the 21^st century, which we are all starting to pay the price for and for which few have been or will be held accountable.

Your comments ?

Some much needed commonsense is working wonders in the current economic environment. Insolvency practitioners are all too often seen as “executioners” in terms of jobs but under a scheme running very well, co-operation between IP’s and the Jobcentre is thought to have assisted up to 32,000 in finding new jobs quickly instead of redundancy if there is an impending insolvency situation.

How it works

The scheme works by way of partnership between insolvency practitioners (IPs) via their trade body R3 and Jobcentre Plus. Ip’s are encouraged to advise Jobcentre Plus about the likelihood of redundancies in a given situation as early as possible giving the Jobcentre some time to seek to find alternative employment for the staff likely to be affected.

This si an excellent scheme and reflects well on all parties, not least Insolvency Practitioners. More creative solutions to difficult business situations should certainly be encouraged.

In the ongoing credit crunch environment, with banks being extremely reticent to lend, and with such situation likely to represent the reality for some time to come, a business seeking credit needs to have it’s house well and truly in order before seeking finance.

Small businesses of course focus on generating more money coming in than going out, and this focus is completely understandable. However, failing to have systems and documents in place at an early stage reduces significantly the ability to raise finance and sources of help are available.

Research has been conducted on the above by restructuring and insolvency firm FRP Advisory who surveyed 150 accountancy, legal and financial advisors.

Some of it’s findings were :-

• 60% of those surveyed  said that less than half of their SME clients produced regular management information on company results, not tracking their own
• 67%  of advisors surveyed predict a rise in the number of corporate insolvencies  during 2011.

A total of 150,900 judgments were issued during the year, which was 27 per cent fewer than the 207,100 issued in 2009, according to annual figures released by the Registry Trust.

The figures also revealed that the value of CCJs issued against businesses fell by almost a third across the year from £899m in 2009 to £613m in 2010.

Meanwhile the number of judgments issued against consumers also fell for the second consecutive year, from 707,900 in 2009 to 579,000 last year, a drop of 20 per cent.

However, the value of high court judgments against both consumers and businesses rocketed in 2010 even though the number of judgments issued fell by 11 per cent.

But the figures showed that the value of high court judgments issued against consumers rocketed from £521m in 2009 to £1.26bn in 2010.

The number of judgments against consumers, which had increased by 35 per cent between 2008 and 2009, fell from 1,270 to 1,239 last year, a drop of 2.5 per cent.

• In numerical terms, the number of overall UK business failures was 10% lower in January 2011, with 1,266 failures than in January 2010.

• Wales and the North West were the only two regions with increased failures, both areas posting big rises compared to the corresponding month last year.

• Two areas doing better than the national average were Yorkshire and the South West.

• there are big variations from sector to sector. Business sectors which currently seem to be struggling include, health, household business, construction and leisure.

]]> http://www.insolvencyhelplinenews.co.uk/facts-figures-update/feed/ 0 http://www.insolvencyhelplinenews.co.uk/hello-world/ http://www.insolvencyhelplinenews.co.uk/hello-world/#comments Thu, 17 Feb 2011 17:43:07 +0000 Craig http://insolvencyhelplinenews.co.uk/?p=1 Continue reading →]]> The Insolvency Service is now banning more rogue directors for longer periods.

The number of director disqualification orders made by the Insolvency Service for a period of 5 or more years, representing some 2/3 of the overall orders to disqualify, was up 12% in the year to March 31 2010. In terms of numbers this represents a rise to 858 cases.

The overall number of corporate insolvencies in the year to March 31st 2010 was 24,078.