The legislation for SCARP is expected to be published this week. In planning and allocating resources to use SCARP to help clients recover from Covid, it is necessary to try and predict what the total market size for SCARPs will be. Given the business similarities between Ireland and the UK, it is useful to look at their statistics for their equivalent procedure, the Company Voluntary Arrangement (“the CVA”).
In order to filter out the distorting effects of Covid, I reviewed the Company Insolvency Statistics for England & Wales for 2019. I set out these statistics below:
Compulsory Liquidations (High Court) 2,970
Creditors Voluntary Liquidations 12,060
Company Voluntary Arrangements 351
I would mention that Receiverships are now low in the UK because use of the procedure is restricted to certain types of company or to floating charges created before September 2003. Many UK Receiverships are now effectively done under the guise of Administrations, which bears some resemblance to our Examinership procedure. I would also mention that High Court liquidations are much more common in the UK as their court processes are cheaper for creditors to use.
As Administrations are described as a “Rescue” tool, I have aggregated them together with CVA’s to guestimate the percentage of “Corporate Rescues” in the UK each year. On this basis, it appears that the CVA type procedure is used in 12.6% of corporate collapses in the UK.
The total number of corporate insolvencies recorded in Ireland in 2019 was 568, of which 5% were Examinership. If you assume that 2019 was a “normal” year, then you could expect that SCARPs/Examinership would, at 12.6%, amount to 72 cases.
It is clear that the insolvency statistics for 2021 will not be normal once Government supports are lifted. It is difficult to predict the “dam” of cases that have accumulated during lock down. We certainly expect a volume of SCARP work, and have set up three SCARP teams under Tom Murray, Andrew Hendrick and I to assist clients get back on their feet. If you have any clients/friends/family or colleagues who require advice on SCARP please refer them to our link below.