The latest figures state that the number of registered company insolvencies in May of 2022 were 1,817. Which is around 79% higher than in May of the previous year. Plus, 34% higher than the pre-pandemic numbers of May 2019, which were 1,352.
The effects of the Covid-19 pandemic are still affecting businesses. But, this is also combined with the rising cost of living, inflation, and rising costs of fuel and energy.
Reasons for these Insolvency figures
There have been many instances where businesses have misused Government schemes and claimed money that they were not entitled to. But, many thousands of these businesses who really needed a loan during the pandemic applied legitimately. However, the ability of these businesses to pay back the loans required a thriving economy. This is not the case, instead, the economic growth has been slowed by issues such as problems with supply chains, inflation, and the rising cost of living.
This means that many businesses are struggling to pay back Covid loans. Which has meant many have been in touch with loan providers to renegotiate the terms of the loan repayment plans.
The Government has guaranteed that 80% of the funds are loaned. But with many businesses struggling to make repayments, if there have been no attempts by the businesses to employ certain systems to identify any improper applications of the loaned funds, the guarantee could be revoked.
Government security on any Covid loans will only take effect if a company enters a formal liquidation process. Therefore, if a business wishes to continue, loan repayments must be dealt with and paid.
HMRC have stated that they would take action to recover funds. These strong measures would include freezing orders to recover the covid loans funds that were ‘fraudulently lent’ to businesses.
The Insolvency Service has also taken strong measures. Winding up companies and obtaining director disqualification orders, some for up to 15 years. These disqualifications were for directors who were responsible for fraudulent behaviour.
About the author
Iain heads Beeston Shenton Solicitors’ commercial litigation department.
Iain has 30 years of experience in Commercial Debt Recovery and Insolvency fields having worked in both Private Practice and Industry and has extensive experience working across all industry sectors and has particular expertise in working with Insolvency Practitioners in advising and recovering outstanding insolvent company ledgers.
Iain brings a pragmatic and commercial approach to legal claims and disputes.
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