Insolvency Warning For New Year
By admin
Issued on behalf of Darwin Gray Solicitors
The number of companies in Wales going under is set to rise in the new year says one of South Wales’s best known insolvency practitioners.
BN Jackson Norton, with offices in Cardiff and Swansea, say enquiries for its services in the three months from September to November 2007 have increased by more than 30% year-on-year and it expects demand to increase further in the next three months.
While potential insolvency cases have come from across a wide spectrum of the Welsh business community, far and away the greatest increase has come from the retail sector.
“We’re working with several businesses already to help them resolve their difficulties in a way that’s best for them,” said Vaughan Jones, a partner in the Cardiff office of BN Jackson Norton.
“We expect that number to keep rising well into the new year, especially in the retail sector. Some retailers already know that they may well have to cease trading but have been continuing in the hope that the Christmas and New Year sales periods will provide some relief.
“Whatever the business, if they come to us early enough there’s often a chance to save the business or at least make decisions to get the best outcome available but inevitably many struggle on until there is no room to manoeuvre.”
Their predictions come as commercial law experts in Wales warn that increased numbers of directors may find themselves liable for wrongful trading if their company is trading while insolvent and consequently they will also risk of disqualification proceedings.
Steve Thompson, a partner in Cardiff-based commercial law firm Darwin Gray Solicitors, said: “This is the first time we’ll have witnessed this scale of business closures since the new Companies Act 2006 was introduced. The Act has codified directors’ duties and there is potential for confusion when directors’ duties in relation to promoting the company become subordinated to a duty to protect the interests of the creditors in an insolvency situation.
“Many directors fall into the trap of ignoring the warning signs, burying their heads in the sand and hoping their company’s difficulties will resolve themselves. Others throw all their energies into battling to stay afloat and fail to take the time to step back and make considered decisions.
“If they address their business’s problems as soon as the warning signs arise, not only can they protect themselves from any possible future legal action, but they also stand a much better chance of putting together a plan that could ensure the company’s survival.”
Vaughan Jones added: “Directors should take note and act when the business is finding it difficult to meet its commitments on a monthly basis or when trade has dropped below the break-even level.
“Our initial consultation with clients – which is free – is often enough and we only see them the once. They stop looking at things through rose-tinted spectacles and go away with a few new ideas of what they could do to survive.
“Sometimes, of course, that’s not the case – often it may be too late for simple remedial action – but then we have a number of options open to us to help give the business and its directors as soft a landing as possible, rather than a crash.”
