Table 1

Summary of Insolvent Liquidations, High Court Liquidations, Receiverships and Examinerships by Industry

Period 1 January 2010 to 30 June 2010

             Source: FGS Corporate Restructuring & Insolvency Division

Table 2

Summary of Insolvent Liquidations, High Court Liquidations, Receiverships and Examinerships by County

Period 1 January 2010 to 30 June 2010

                         Source: FGS Corporate Restructuring & Insolvency Division

Summary Analysis

The number of Creditors’ Voluntary Liquidations, High Court Liquidations, Receiverships and Examinerships in the six months ended 30th June 2010 has increased by 25% on the same period in 2009.  Declan Taite, FGS Corporate Restructuring & Insolvency Partner analyses the statistics.

Figures compiled by FGS show that 912 companies were placed in liquidation, receivership or examinership in the first 6 months of 2010, representing an increase (25%) on the 733 failures for the same period in 2009. 

However the acceleration in the number of failures in late 2009 and early 2010 has not continued in the 2010 half year figures. In fact the number of failures in the second quarter in 2010 was 443 compared with 469 for the first three months of the year. It is nonetheless probable that some 1,850 to 1,900 failures will be recorded for the full year which compares with 1,570 failures in 2009.

The tables above set out an analysis of these failures by industry (table 1) and geographical location (table 2).

The figures, whilst representing significant increases are not overly surprising when set against a backdrop of continued economic downturn.

The ongoing demise in the construction sector is obvious from the statistics.  360 or 39% of all failures occurred in this sector.  This compares with 41% in 2008 and 35% in 2009.  To put these figures into context, there were nearly as many failures recorded within the sector in the first six months of 2010 than were recorded in the previous two years combined.

The failures in the construction sector are no longer restricted to medium sized developers and or sub contractors. 2010 continues to see a number of high profile collapses within the sector.  The ongoing reduction in house prices, significant oversupply of units, the unavailability of credit for developers and purchasers all indicate that much uncertainty is likely to prevail in the short term.  The commencement of the transfer of the first tranche of toxic loans to NAMA is only likely to increase any uncertainty. 

With regard to the trends emerging from the annual figures it is noted that Dublin continues to account for the majority of failures. Some 391 or 43% of all failures in the period took place in the capital in contrast to 143 (46%) in 2008 and 312 (43%) in 2009.

Increases in the number of failures in Clare (6 in 2009 as opposed to 24 in 2010); Offaly (9 in 2009 as opposed to 20 in 2010); Tipperary (11 in 2009 with 21 in 2010) and Louth (19 in 2009 as opposed to 30 in 2010) should be noted.

Notable trends in the industry sectors, in which the failures have occurred, include the significant increase in failures (133%) in the retail sector from 51 in 2009 to 119 in 2010.  This is due primarily to inability to pay high rents that were originally struck at the height of the economic boom and continued reduction in discretionary spending by consumers.

Other notable sectors in which failures occurred were hospitality sector (122) or 13% of the total failures, home furnishings / interior design (48), motor industry (46) and professional services (42).

A significant increase in the number of receiverships was recorded in the first six months of 2010 when compared with the same period in 2009.  Between January and June 2010 financial institutions / debenture holders appointed receivers to 162 businesses as opposed to 79 in the same period in 2009.  This represents a significant 105% increase.  Furthermore these figures do not take account of circumstances where receivers were appointed in respect of personal borrowings as opposed to loans and advances to limited liability companies.  A more realistic figure for total receiverships in the first six months of 2010 is likely to be closer to 200.  The concept of and utilization of “Statutory Receivers” as set out in the NAMA legislation will be interesting to observe in the remainder of 2010.

The majority of the receivership appointments continue to occur in the construction / development, hospitality sector and retail.

The utilization of the examinership process has decreased significantly in 2010.  21 companies had examiners appointed to them in the first half of 2010 as opposed to 58 in the first six months of 2009.  This represents a decrease of 64%.

The number of High Court Liquidations in the first half of 2010 was relatively static on the previous year with 57 Official Liquidators as opposed to 48 in the same period in 2009.  Creditors’ Voluntary Liquidation continue to be the most common form of formal insolvency process accounting for 74% of all failures in the first half of 2010.