Notes to Editors
1.
The official Insolvency Statistics are the most
comprehensive record of the number of corporate and individual
insolvencies in England and Wales. Insolvencies in Scotland are
also included, but these are shown separately as they are covered
by separate legislation and defined differently.
2.
The statistics are derived from administrative records of
the DTI Insolvency Service and Companies House Executive Agencies.
The figures for company liquidations are made up of compulsory
liquidations (winding-up orders made by the courts) and creditors'
voluntary liquidations registered at Companies House. Figures for
individual insolvencies comprise bankruptcy orders and individual
voluntary arrangements under the Insolvency Act 1986 and deeds of
arrangement under the Deeds of Arrangement Act 1914. Individual
voluntary arrangements and deeds of arrangement are now included
under one column.
3.
Company liquidations in England & Wales and Scotland
are also presented broken down by industry.
For bankruptcy orders, the self-employed are shown
separately and with a similar industry breakdown. The industry
breakdown for cases in England and Wales is only available one
quarter in arrears of the headline series. Work is in hand to
update the classification of new cases to the Standard Industrial
Classification (SIC) 2003 to bring them into line with other
official statistics, with a view to publishing new case statistics
according to SIC2003 later this year.
4.
Numbers of insolvencies are not directly comparable with
numbers of new business formations. Statistics of business
start-ups and closures that are directly comparable with each
other have been assembled from VAT records and are published by
the Department of Trade and Industry. The latest figures are those
for 2004, and were issued in a DTI press notice on 12 October
2005. More detailed figures are available via the on-line database
NOMIS. Additionally, analysis into the number of firms in the
United Kingdom estimated the total number of businesses at the
start of 2004 at 4.3 million.
5.
The X11ARIMA program (developed by Statistics Canada) is
used for the seasonal adjustment of the insolvency statistics,
this being the recommended program within UK National Statistics.
6.
A company or individual with debts that they are unable to
pay as they fall due is said to be insolvent.
7.
Insolvent companies are dealt with under the Insolvency Act
of 1986. They can either
be the subject of a compulsory
liquidation (winding-up) order obtained from the Court by a
creditor, member or director or
themselves pass a resolution, subject to the approval of a
creditors' meeting that the company be wound up voluntarily (creditors
voluntary liquidations).
In either case they are said to have been wound-up,
and numbers are given in Tables 1 and 6. A third type of winding-up,
members' voluntary liquidation, is not included because it does not
involve insolvency.
8.
The Insolvency Act 1986 also introduced the procedures of company
administration orders and company
voluntary arrangements. The administration procedure gives a
period of time during which creditors are restrained from taking
action and a court appointed administrator puts forward proposals to
deal with the company’s financial difficulties. The Company
Voluntary Arrangement procedure aids business by enabling a company
in financial difficulty to come to a binding agreement with its
creditors. These are
listed separately in Table 3.
9.
The Enterprise Act 2002 introduced revisions to the corporate
administration procedures, replacing Part II of the Insolvency Act
1986 with Schedule B1. These include the introduction of additional
entry routes into administration that do not require the making of
an administration order and a streamlined process for Administrations whereby a company can in some circumstances be
dissolved without recourse to liquidation. The primary objective of
administration (and of Company Voluntary Arrangements) is the rescue
of the company as a going concern; where liquidation does result
these cases will be recorded under the insolvency figures at Table
1. These provisions came into force on 15th September
2003 and Administrations under the Enterprise Act have been included on Table
3 from Q3 2003 (dissolution follows 3 months after a notice is filed
with the Registrar of Companies, if no objections are raised by the
court).
10.
Receivership
appointments
comprise administrative
receivers appointed under the 1986 Act and certain other
receivership appointments, for example under the Law of Property Act
1925. Due to the use of the same statutory documentation for
different types of receivership, it is not possible to give a
breakdown between them. The provisions of the Enterprise Act 2002
(section 250) have made some changes to the procedures for
administrative receivership from 15 September 2003.
11.
For individuals the term bankrupt
is used to indicate insolvency.
12.
Insolvent individuals in England and Wales are dealt with
mainly under the Insolvency Act 1986. A bankruptcy
order is made on the petition of the debtor or one of his
creditors when the Court is satisfied that there is no prospect of
the debt being paid. (Figures
for bankruptcy orders include administration orders, which are bankruptcy orders relating to the
estate of a deceased debtor). On 1 April 2004 there was an increase
in the amount of the petition deposit required before a bankruptcy
order can be made. There was a significant rise in the number of
bankruptcy orders made in the last two weeks before the increase in
petition deposits became effective. There are also individual
voluntary arrangements and deeds
of arrangement, which enable debtors to come to an agreement
with their creditors. Table 2 summarises all of the above types of
individual insolvencies.
13.
Insolvent individuals in Scotland are subject to sequestration
(bankruptcy) or protected trust deeds under the Bankruptcy
(Scotland) Act 1985 (as amended).
The Act was amended by the Bankruptcy (Scotland) Act 1993.
Protected trust deeds are voluntary arrangements in Scotland,
but although they fulfill much the same role as individual voluntary
arrangements, there are important differences in the way they are
set up and administered. Details
of both sequestrations and protected trust deeds are found on the
register of insolvencies which is maintained by the Accountant in
Bankruptcy. Further
information about insolvency in Scotland can be found on the
Accountant's website at www.aib.gov.uk.
14.
Under the Insolvency Act 1986 and the Insolvent Partnerships
Order, insolvent partnerships may be wound up like an unregistered
company or administered following bankruptcy orders against the
partners. Insolvent Partnerships can also enter administration
or a voluntary arrangement.
15.
Details of insolvency research and evaluation can be found on
the Insolvency Service website at www.insolvency.gov.uk/insolvencyprofessionandlegislation/insolvencylaw.htm
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