Corporate insolvencies to date in 2017 total 657, down 14% from same period in 2016
The latest insolvency statistics published by Deloitte show corporate insolvencies in the first three quarters of 2017 totalled 657. When compared with the same period in 2016 (765) this is a decrease of 14% and suggests that appointments continue to level out somewhat.
Examinerships continue to remain at disappointingly low levels and so far in 2017 only 28 examiners have been appointed. While this represents just 4% of the 657 corporate insolvencies it is a significant increase on the comparable period, when just 11 examiners were appointed (1%). This low level of examinership take-up has been seen in prior periods and shows that the introduction of new legislation in early 2014 has not had the intended effect of encouraging more struggling SMEs to avail of this cost-effective and accessible option. For smaller SMEs there are still options to explore this type of restructuring through use of the “super-lite examinership”, s.450 schemes of arrangement. Typically this is a less costly option that involves less court involvement but affords struggling companies a real chance at survival. The case for examinership was recently strengthened by the Court of Appeal who found that pre-existing commercial contracts should not be used as rationale for preventing the appointment of an examiner, particularly as such contracts may be negated as part of the examinership process, in the interests of rescuing an otherwise viable company.
The examinership process has a high rate of success (circa 75%). At Deloitte, we have the ability to exceed that rate of success, as we have the experience and crucially, the ability to raise the necessary risk capital, be it debt or equity, to get a struggling company refinanced for a brighter future. Companies who deal with their historical debts through a restructuring process will emerge with stronger balance sheets, which in turn opens doors for them to debt and equity providers, enabling them to grow their businesses.
A closer look at the details of the statistics shows that of the 657 corporate insolvencies recorded, creditors’ voluntary liquidations accounted for the majority, with 393 recorded in the period (60%). This is down 12% from the same period last year where creditors’ voluntary liquidations accounted for 448 of the appointments recorded. Receiverships accounted for 205 (31%) of the total corporate insolvencies to date in 2017, down 25% on the same period last year. This mix of insolvencies is typical of prior periods.
There were 31 court liquidator appointments in the current period, down by only 1 from the same period last year. In the majority of these cases the Revenue Commissioners took the petition to wind up.
Looking at the ‘Top Five’ industry sectors, it was the service industry which recorded the most insolvencies to date in 2017 with 229 appointments (35%). This is just a 4% increase on the same period in 2016 when 220 appointments were recorded. The construction industry recorded the second highest level of appointments with 92 (14%). This is a decrease of 31% from the comparable period. In previous years, the construction industry consistently had the largest number of insolvency appointments and it wasn’t until 2015 that the service industry overtook it for most appointments recorded. This indicates that the level of corporate failure in the construction industry is now starting to slow down. The third slot was again taken by the retail sector where there were 77 insolvencies, 12% of the total, an increase of just 1 on the prior period. The hospitality sector is fourth with 69 insolvencies, 10% of the total and down 18% from last year. Finally in fifth, the wholesale sector recorded 31 insolvencies in the period which represented a 16% decrease on the same period in 2016 (37 cases). Of these 31 cases, the majority of appointments were in the agribusiness and food areas.
Looking generally at recent results it may be that we are now entering a period where the total number of corporate insolvencies begins to level out somewhat. Looking at the overall trend of each year since 2007, the highest number of insolvencies was seen in 2012 with 1,684 and the number recorded each year has been declining consistently since then. While we aren’t seeing the low levels of insolvencies recorded during the so-called Celtic Tiger years, it may be that those particularly low numbers seen in 2007 and 2008 were outliers themselves and the levels of this year and last are a more realistic baseline to compare future levels to. This is reflected in the low percentage difference between the current period and the same period in 2016.