Four companies a day going out of business

04 January 2010

Over 1,400 Irish companies were declared insolvent in 2009 – an increase of 82% on the previous year and up 287% on 2007, according to provisional statistics compiled by InsolvencyJournal.ie. As the economic downturn accelerated and consumer confidence plummeted, the number of insolvencies increased rapidly – in particular in the construction, services and retail sectors.

In total, 1,406 companies collapsed this year with an average of almost four companies a day going bust. There was, however, a 40% drop in the number of examinerships compared to 2008 with only 37 companies applying for court protection during the year.

Irish businesses experienced a particularly tough end to the year with 156 companies declared insolvent during December, the highest total of any month. This represents a 17% increase on the next highest month – August – when 133 firms went under.

As is to be expected, the construction industry was by far the worst-affected sector, with a staggering 453 construction companies declared insolvent, representing over 30% of the year's insolvencies. While failures in the sector dipped in November, the number of construction companies going bust peaked at a year-high figure of 49 in December.

The services sector was the next hardest hit with 278 insolvencies – almost 20% of the total. 201 companies in the retail industry collapsed this year, reflecting the impact of the downturn on consumer spending, while a high numbers of insolvencies were also recorded in the hospitality (154) and manufacturing (123) sectors.

The statistics also show that a total of 37 companies were placed in examinership in 2009. 46% of these were successful, including the Chartbusters and Smart Telecom cases, while 14 failed. One of the most high-profile cases was that of O'Brien's Sandwich Bars – the rescue bid for the company failed after the High Court refused to repudiate leases which the company held over its franchised outlets.

A Supreme Court decision is still pending regarding the Fleming Construction Group examinership after ACC Bank challenged the group's proposed ten-year survival plan, and a further five companies are still under court protection. The number of examinerships in 2009 down by 40% compared to the 62 cases in 2008 – a figure inflated by the 13 Thomas Read Group companies that were granted court protection that year.

The drop in examinerships could also be attributed to demands from the High Court for higher standards in the examinership process. Earlier this year, Mr Justice Peter Kelly called for more detail in the independent accountant reports that are presented at an examinership hearing, as fewer companies successfully emerge from the process. Companies could also be wary of the process following the Supreme Court's refusal to grant protection to six companies in the Zoe Group controlled by property developer Liam Carroll.

Creditors Voluntary Liquidations (CVLs) were the most common form of insolvency in 2009 with a total of 1,139 cases, double last year's tally. The number of CVLs peaked in the last month of the year, increasing by 50% in December (139) compared to November (92).

The figures also show a surge in receivership cases this year, as banks increasingly moved to have receivers appointed to recover debt. There were 124 receivers appointed in 2009 – up 118% on last year. Receivership appointments, however, declined in the last month of the year – down 85% to 7 from 13 in November – suggesting that perhaps Irish banks are boxing clever before NAMA.

Commenting on the figures, Ken Fennell, from InsolvencyJournal.ie said: ‘The number of insolvencies in 2009 was in line with our original predictions back in February. For the coming year the outlook remains pessimistic as the rate of insolvency will be similar to 2009 with a peak mid-year followed by a gradual reduction in the last quarter of 2010".