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15% fall in corporate insolvencies in 2014 – Deloitte

Number of insolvencies 31% below peak after economic crash

Uptake of examinations remains low despite legislative changes

The total number of corporate insolvencies in Ireland fell by 15% in 2014 compared to 2013 based on the latest statistics released today by Deloitte and published by Insolvencyjournal.ie. There were 1164 insolvencies recorded in 2014, a drop of 201 on the 2013 total of 1365. The total number in 2014 is 31% below the peak of 1684 recorded in 2012 since the economic crash in 2007.

The construction sector accounted for 20% of the total number of insolvencies in 2014 – the largest proportion at an industry level. However, this did reflect an improvement on 2013 when it accounted for a quarter of the total number of insolvencies. The services, retail, and hospitality sectors accounted for 16%, 14%, and 13% respectively which was broadly in line with prior years.

With regards to geographic breakdown, Leinster accounted for the largest portion of the total. Just over two thirds (68%) of the total number in 2014 were based in Leinster, up 4% on 2013. Munster accounted for 19% - 4% below 2013 - while the number of insolvencies in Connaught and Ulster remained unchanged at 9% and 4% respectively.

Analysis of the types of insolvencies reveals that creditors’ voluntary liquidations accounted for 67% of the total number; receiverships accounted for 26%; court appointed liquidations contributed 6% of the total; and examinerships accounted for 2%. All types remained at relatively the same percentage of the total number of insolvencies in 2014 when compared with 2013. Creditors’ voluntary liquidations remained at 67%, while receiverships fell from 27% to 26%. Court appointed liquidations increased from 5% to 6%. Examinations remained stagnant at 2%.

The number of members’ voluntary liquidations (solvent companies being wound up to distribute the remaining assets to its shareholders) increased by 12% in 2014 to 692.

2014 also saw the first full calendar year of the Irish Insolvency Service. 310 debt arrangements were agreed based on almost 1,200 applications received by the end of September 2014. The debt involved with these applications was almost €520 million, with 75% relating to property debt, and males accounting for 52% of applicants.

David Van Dessel, Partner, Restructuring Services, Deloitte and author of the book ‘A Practical Guide to Insolvency’ commented: “The fall in the total number of corporate insolvencies in 2014 was in line with forecasts and indicative of an improving economy. 2015 will likely see similar levels in the number of liquidations, with receiverships in the construction, retail, and hospitality sectors prevailing also as the process is now seen by lenders as a method of preserving, claiming, and extracting value in companies although these are insolvent.

“However, the stagnant level of examinations as a percentage of the total number of corporate insolvencies in 2014 was unexpected and indeed disappointing. The take-up of examinations by companies to avoid liquidation was disappointing given the recent legislative changes making this a more accessible and cost effective option to smaller companies. We will hopefully observe increased use of this option in 2015. It’s important to bear in mind that this can only happen if companies and their directors act early, a critical factor in any insolvency process.”

Looking ahead, Van Dessel also anticipates continued significant activity with regards to rent receiverships and fixed charged receivers appointed to commercial properties in 2015.

“Department of Finance figures show that as at the end of September 2014 there were 5,418 rent receivers appointed by the six main lenders, compared with a total of 3,179 in all of 2013.  By the end of 2014 there will be at least a doubling in the number of rent receivers appointed. There are currently over 32,000 Buy-to-Let mortgage accounts in arrears, of which over 26,000 are in excess of 90 days. Given this high level, we anticipate continued activity in the area of rent receivers in the coming year,” he commented.

“Currently, we are also observing a significant amount of activity with regards to fixed charge receivers appointed to commercial properties. There have been significant sales of loan portfolios during 2014, with a total par value of debt of €30 billion being sold, typically, to private equity firms. These will now likely engage with the underlying borrowers in an attempt to generate a return on their investment. In some instances this will lead to negotiated settlements with borrowers. In other instances enforcement against the underlying secured asset will be the end result, which is another indicator of increased activity in the area of investment property receivership.”

Along with acting early, Van Dessel highlighted some practical tips to help SMEs to overcome corporate insolvency including:

  1. Quantify the problem
  2. Make an honest assessment of your ability to repay all creditors
  3. Seek professional advice/assistance
  4. Chart the right journey for the recovery of your business

The full breakdown of statistics can be found at www.insolvencyjournal.ie/stats. InsolvencyJournal.ie is an independent and unique news service site that produces regular, timely, high quality articles and statistics across all industries and lists daily updates on insolvency notices (creditors meetings, appointments and petitions) across the country.

A Practical Guide to Insolvency, 2nd Edition, by Deloitte and published by Chartered Accountants Ireland, is now available to purchase on the Chartered Accountants Ireland website here.

Notes to editor
The statistics for corporate insolvencies are based on examinerships, receiverships and liquidations filed with the Companies Registration Office.

For further information please contact
Mark Brennock
Murray Consultants
01 498 0300
mbrennock@murrayconsultants.ie

About Deloitte
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The information contained in this press release is correct at the time of going to press.

Deloitte has almost 2,000 people in Dublin, Cork and Limerick providing audit, tax, consulting, and corporate finance services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges.
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