It has been reported that the number of winding up petitions issued by HMRC has decreased by 42% over the last year to reach its lowest figure in 5 years. HMRC seemingly prefer to seize the assets of a business and sell these to recoup outstanding payments. This may be good news for the public purse however is it good news for the economy as a whole?
In 2012/2013, according to figures released by Pinsent Masons, HMRC issued 3,733 petitions down from 6,440 in 2011/2012. The number of winding up orders obtained by HMRC also fell by 25% to 2,541.
With HMRC not petitioning and banks showing greater tolerance with borrowers, coupled with funding for businesses being harder and more expensive to obtain, will so called “Zombie Companies” continue or the numbers of such companies even rise? Zombie companies are making no profit with no real sign of doing so in the near future. The companies are just about generating enough liquidity to service their debts and are showing no signs of growth.
It has been argued that the conduct of the banks in allowing companies to continue trading under special measures in order to reduce or avoid significant losses is impacting upon their decision to lend. Such lending is needed to give the economy a much needed boost.
One school of thought is that HMRC’s approach to seizing assets could be the final blow for many businesses forcing them into a formal insolvency situation. Only time will tell.
Should directors of these companies now take matters into their own hands? There are experts available to assist directors with restructuring advice and formal insolvency where necessary. If advice is sought early enough, this maximises a company’s chances of being rescued via a restructure or some form of insolvency procedure.
Professional advice should be sought as soon as it becomes apparent that a company is facing financial distress. As a company director, if there is any doubt at all as to whether the company is solvent or whether it can survive a period of insolvency, specialist insolvency advice must be obtained.
Stephensons have a dedicated insolvency law team that can assist directors in such situations.
By Nicola Whittle, associate solicitor in the commercial litigation department