Small Business - Insolvency reform 'overdue'
The rate of business preservations after insolvencies rose by 8% to 30% over the past two years, figures released by the Society of Practitioners of Insolvency reveal.
But SPI’s research also showed that insolvent small businesses are more in debt now than at any time since 1993, owing #1.60 for every #1 of turnover.
Excluding liquidations, SPI members found rescue solutions in 59% of formal insolvencies. Complete company survival is achieved in 25% of all cases, compared with 13% two years ago.
Company voluntary arrangements, representing 15% of non-liquidation insolvencies, scored a 94% business rescue rate – up from 75% last year.
Brendan Guilfoyle, SPI president and a partner with Geoffrey Martin & Co, called for CVAs to be more access-ible to small businesses. ‘The current CVA procedure has serious legal shortcomings, offering companies no protection from creditor action while they try to put an arrange-ment in place,’ he said.
‘Hundreds more businesses and thousands of jobs could be saved if the government introduced the long-awaited reform of CVAs promised by its predecessors’, he said.
Guilfoyle stressed that small businesses must help each other. ‘Most small-business failures are due to lack of general management skill or inability to manage cashflow. These are preventable failings,’ he said.