Insolvency risk does not feature in the top five concerns for respondents but, nonetheless, globally, 31% considered it a ‘very’ or ‘extremely significant’ risk for directors and officers and that concern has grown since the previous survey was undertaken.
It is felt most keenly by those in the transportation and retail industry, which is no surprise given the significant impact the pandemic has had on these sectors.
Most countries implemented emergency legislation, providing financial support and relaxing insolvency rules in order to allow companies to navigate the difficult circumstances. This translated into record low numbers of insolvencies in 2020 and through to mid-2021.
In the U.K., statistics show Creditors’ Voluntary Liquidation numbers are currently more than double the level in February 2021 and are 40% higher than pre-pandemic levels. However, the number of other insolvency procedures, such as compulsory liquidations for companies and bankruptcies for individuals, remains very low.
It is our view that now government protections have largely ceased numbers will rise and we can expect a greater number of filings in the coming months and years.
Claims against directors and officers related to insolvency events are common and already representa large risk exposure. Insolvency practitioners are duty-bound to closely examine the decisions and conduct of the directors and senior management in the period leading up to insolvency, which could see the directors and officers investigated for breach of duties to the company and for breaches of company and insolvency legislation.
| Title | File Type | File Size |
|---|---|---|
| Directors’ Liability Survey 2022 – Insolvency | 1.7 MB |
