Not so much an undertaker, more of a midwife actually….

May 23rd, 2019

When I tell people that I am an insolvency practitioner they usually nod solemnly and quickly move on to talk about the weather. I imagine that undertakers get a similar reaction. Midwives, however, receive beaming smiles and comments along the lines of ‘Oh, how lovely!”.

Although it is true that members of my profession do facilitate the orderly, equitable and legal laying to rest of failed companies, we often play the midwife role too. To explain, let us turn to the latest Q1 2019 (January-March) England & Wales insolvency statistics (published by the Insolvency Service).

My regular readers will not be surprised to learn that underlying corporate insolvencies rose by 6.3% in Q1 2019 compared to Q4 2018, and rose by 5.1% compared to Q1 2018. My forecasts about the problems facing business owners and directors have been depressingly accurate for the last two years.

I am a member of R3, the insolvency and restructuring trade body. And R3’s president, Stuart Frith, had this to say (among other things) about the quarterly figures: “Over the last year, R3’s members across the UK reported that demand for their services – from advice on turnaround and restructuring processes to formal insolvency procedures – increased, and this has carried over into the start of 2019.

“We would encourage directors of companies who are concerned about the current market conditions to seek advice from a knowledgeable and qualified professional source. The earlier they do this, the more options they will have for helping their company improve its performance.” 

What Stuart is doing is talking about the midwifery aspects of our service. At IPD we often see companies that are part of a group (or trading divisions within a company) that have reached the end of their lives, or have remained dormant for a number of years and are taking up time and cost to run them. So, although a liquidator can simply provide assistance in putting them to bed properly, we may also be able to be a bit more creative – such as making use of unused tax losses to benefit the group, for example.

Sometimes we can see that the structure of a group may also need reorganising to reduce the risk between businesses, or to make it more efficient. This is where the inner midwife kicks in and I am able to advise on the best way to restructure using formal or informal processes, or a mixture of both.

My colleagues in accountancy also understand the restructuring role that we play and we are often asked to use our midwifery skills to deliver a shiny new business from the bones of a failing structure, better organised to face the challenges of modern business life.  Whilst “phoenix” companies have had a bad press, the process is a valuable one when used properly to allow a reorganised trading business (and jobs) to continue.

So, although we do attend to the last rites, we are also present at a few births, too.

Stand-up routine…I will return to the first quarter statistics in another article as there is much to be concerned about. To lighten the mood, however, I will leave you with the response from one particularly impish member of a local accountancy firm over a drink in the pub with his fellow number-crunchers.

One of his colleagues pointed out that the UK’s leading sex toy and lingerie business was struggling with a £3 million loss (here – seriously…).

“I see Ann Summers has gone into the red”, said the chap at the bar.  “Ah”, replied our quick-witted accountant: “So much for inflation…”