The Business Sale Report, which provides information on distressed businesses, has released figures showing a 22 per cent increase in the number of winding up petitions lodged through the courts in the second quarter of this year, compared to the same period last year.
These figures continue the upwards trend of 2011, which began with a 30 per cent rise in winding-up petitions numbers in the first of the year over the first quarter of 2010.
In the period April to June 2011, general construction, civil engineering and real estate sectors were the hardest hit sectors, with an average 50 per cent increase in the number of petitions lodged in their respective categories. Unsurprisingly, London and the surrounding Home Counties are once again the areas that have seen the most petition claims.
The increase comes as a direct result of businesses defaulting on repayments to creditors or brought about by a company’s failure to meet tax repayment schedules arranged with HMRC. With the new coalition government taking a harder line on tax avoidance, failure to meet payment schedules is now almost certain to result in the termination of previously made tax arrangements with HMRC. In almost all cases, this is then followed by a petition to wind the company up.
A winding-up petition applies to a company, rather than an individual, and if a business is insolvent at the time of winding up, the creditors will usually receive a percentage of what they are owed. If the petition is successful, an insolvency practitioner is appointed by the court to conclude the company’s affairs, before it is finally dissolved.
Corporate barrister Donald Ideh told the Business Sale Report: “It is still the case that some companies abuse the winding up process by using it as a debt recovery process. However, despite these issues, it is very likely that there has been a significant increase in the overall number of petitions presented when compared with the previous year. The more useful comparison will be at the end of the financial year when we look at the figures of final orders granted when compared with the previous year. All indications suggest at this stage that the figures are going up."
The Business Sale Report monitors distressed business activity including all winding-up petitions lodged in the UK this year.
The research service is exclusively available by subscription only at http://www.business-sale.com. 
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