Liquidation stats “significantly” lower, but ...

The number of liquidations for the first nine months of 2011 fell by a significant 15,5% year-on-year, figures released yesterday by Statistics SA reveal.

However, notes Adam Harris, a director in the Insolvency and Restructuring group of corporate law firm Bowman Gilfillan, there has been an increase in the third quarter of the year – albeit by a relatively modest 2,1%. He expressed a measure of concern over the fact that from the low-point in May of this year, the trend-line has been steadily upwards.

Concern over that trend is exacerbated by Harris’s observations of other relevant data. Thus: “Although Stats SA does not report on the number of business rescue applications, my personal experience has been that this figure has increased substantially during the period.

“Regrettably, whilst the business rescue mechanism was designed to rescue troubled businesses, in many cases these applications are being abused by debtors anxious to avoid paying their bills. Employees and investors become pawns in the game. A number of these applications are before the courts at the moment, and time will tell how the law will be interpreted.”

In a reflection of relatively good news for individuals, the number of insolvencies (or personal bankruptcies) has eased further, with the year-on-year figure for the first eight months of 2011 reflecting a decline of 33,8%.

According to Harris: “The figures are now equivalent to where we were some four years ago – in November 2007.”