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More Company Directors Opting for Voluntary Liquidation

By Jon Munnery
15 March 2023

A growing number of company directors in England and Wales are opting to take their businesses into liquidation voluntarily.

Creditors’ Voluntary Liquidation (CVL) cases increased notably during February 2023 to drive up the overall rate of corporate insolvency across the UK.

According to the latest official Insolvency Service data, a total of 1,505 CVL cases were recorded in February, which represents an increase of 13 per cent compared to the same figure for February 2022.

The number of voluntary liquidation cases recorded in February is also up by 59 per cent compared to February 2020 and directly prior to the start of the coronavirus pandemic.

Instances of compulsory liquidation more than doubled between February 2022 and the same month this year but those case rates are still well down in comparison to the numbers for February 2020.

The Insolvency Service has said that recent rises in compulsory liquidation rates are partly a consequence of HMRC pursuing winding up petitions more frequently.

Overall, the total number of corporate insolvency cases across England and Wales was up by 17 per cent in February this year compared to the same month a year earlier.

Nicky Fisher, the vice president of the insolvency and restructuring trade body R3, has noted that cases of voluntary liquidation have been on the rise over the past four years.

“More and more directors are choosing to close their businesses,” she said.

“After nearly three years of lockdowns, supply chain issues, rising costs and falling revenues, many business owners have simply had enough, and are shutting up shop before they are forced to.”

Reflecting specifically on the data for liquidations in February, Ms Fisher suggested that CVL rates could have been driven up in part by tough trading conditions over the festive and new year period.

With economic headwinds still very much in evidence, R3’s vice president said: “Now is the time for directors to be aware of the signs their businesses are struggling and to seek advice if they show themselves.

“Cashflow issues, payment delays and rising stock are all signs a business is distressed and the earlier directors seek advice, the more options they have open to address the issues they face.”

Jonathan Munnery
Insolvency & Restructuring Expert
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