Continued increase in corporate insolvency in Scotland

It would appear that the trend we reported in the rising numbers of Scottish corporate insolvencies is showing no let up.

The Accountant in Bankruptcy ("AiB") has just released its corporate insolvency statistics for the fourth quarter of the financial year 2021-22 - January to March 2022. The AiB monitors liquidations and receiverships, and their statistics show that the number of companies entering liquidation has almost doubled for the same quarter in 2020-21, a total of 240 companies compared to 91 in the prior year.

It is interesting to note that in the past, most corporate insolvencies were compulsory liquidations whereas since the first quarter of 2020-21 the majority have been creditors' voluntary liquidations – meaning it is the directors of companies who are deciding to wind up based on the company's inability to pay its debts, rather than the driver being creditor pressure.

In the current financial year there have been 854 corporate insolvencies compared to 442 in 2020-21. Due to the Covid-19 pandemic, temporary changes were made which made it harder for creditors to pursue the liquidation of debtor companies and financial support was made available from the government, but these changes have now been repealed and the current increase could be due to withdrawal of additional support. We anticipate that due to legacy pressures of the pandemic, inflationary pressure and energy prices increasing that we may well continue to see a rise in the levels of corporate insolvencies.

At Brodies, we advise creditors and debtors on all forms of insolvency. As always with such matters, the key is to seek advice as early as possible from your Solicitor and an Insolvency Practitioner.