The latest insolvency statistics have now been released by the Insolvency Service and the Accountant in Bankruptcy ("AiB").

The AiB is responsible for the devolved elements of corporate insolvency, which is limited to liquidation and receivership. The Insolvency Service on the other hand records details on matters for which responsibility is retained at Westminster, being administration and CVAs.

Both the UK wide and Scotland specific statistics appear to show that the extremely low comparative levels of corporate insolvency that we have seen as a result of the COVID temporary measures may be coming to an end.

The AiB reports that the number of Scottish companies becoming insolvent or entering receivership increased in the second quarter of 2021-22, with 211 companies becoming insolvent compared with 117 in the same quarter of 2020-21, an increase of over 80%.

Historically, most insolvencies in Scotland have been represented by compulsory liquidation, however, the uptick in the statistics has been driven by creditors voluntary liquidations ("CVLs"). Compulsory or court ordered liquidations together with administrations remain very low, no doubt an effect of the temporary measures. There have been no CVA or receivership appointments in Scotland at all during this period.

It may be that prudent directors are taking appropriate action now to place their companies into CVL due to the ongoing strain of the pandemic coupled with the ending of government support and the easing of restraints on creditor action.

With furlough having been withdrawn at the end of September and restrictions on liquidation petitions being loosened (petitions may be presented now for debts of greater than £10,000 regardless of the financial effect on the debtor of coronavirus), we anticipate that we will see an increase in the number of compulsory liquidations.

We understand HMRC and the Insolvency Service are now turning their attention to bounce back loan lending. Their ability to take action is being expanded by the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, which will allow the Insolvency Service to investigate directors of dissolved companies, which were dissolved although they had unpaid debts to creditors. Previously, this was only possible where a company was placed in a formal insolvency process.

Interestingly, while there have been no CVAs in Scotland during the period, the UK wide position also shows a substantial reduction these.

We wonder if the extension of the restraint on irritancy for arrears by commercial landlords together with the proposed arbitration scheme for disputes between landlords and tenants may mean that CVA levels will continue to be depressed?

Overall, however, we expect the trend for all forms of insolvency to be upwards with a likely associated increase in action against directors. We advise creditors and debtors on all forms of insolvency at Brodies. As always with such matters, the key is to seek advice as early as possible from your Solicitor and an Insolvency Practitioner.