Commerical solicitors are cautioning company directors to get legal advice immediately if there is any danger of their company going insolvent. The warning comes after publication of the latest government figures on company insolvency which show a rise of 26.3 per cent in the last year.

The results come days after a survey suggesting that by the end of 2009 smaller company insolvencies will rise by 41 per cent compared to the end of 2007.

The statistics from The Insolvency Service show that there were 4,001 compulsory liquidations and creditors’ voluntary liquidations in England and Wales in the third quarter of this year. This signifies an increase of 10.5 per cent on the previous quarter and 26.3 per cent on the same period a year ago.

This trend is corroborated in a recent survey by R3, the organisation for insolvency practitioners. The poll of its 2,073 members suggests that in two years there will be a rise of 41 per cent in insolvencies, approaching heights last seen in the 1992 recession.

The difficulties faced in the current economic climate are also outlined by the Federation of Small Businesses, an organisation representing the self-employed and owners of small firms. It says that 80 per cent of its members have faced increased costs in the last year and 46 per cent have seen a decrease in trade.

Commercial solicitor Nicholas Philips of City law firm William Sturges emphasises the importance of businesses faced by such a situation taking legal advice early. “It could reduce the risk of directors’ disqualification proceedings against you,” he says, “and of a demand that you contribute to the company’s assets if it is insolvent when wound up."

Useful links

What to do when using a commercial solicitor

The Government Insolvency Service

Business Link insolvency advice

Insolvency Practitioners Association