Insolvency in retreat: the numbers behind England and Wales’ surprise drop | Commercial Awareness Compass #41

Welcome to the commercial awareness campus. This is your weekly guide to developing commercial insight in a way that goes beyond just the news. Each week we focus on one major story, breaking it down to help you build your understanding at three levels, beginner, intermediate, and advanced. I'm Tori. I'm a future trainee solicitor, and I'm joined by Henry, a corporate lawyer, and content creator. This session, we will focus on the drop-in company and solvencies in England and Wales. As we go through the beginner, intermediate, and advanced levels, really pay attention to how each explanation builds on the last. So we'll start by going over the basics, help you get to grips with what's going on here. Then we'll be taking a commercial and legal perspective to think about what are kind of the concerns that lawyers might have and should focus on and clients. And then we'll think about, in the advanced level, the strategic thinking that goes into helping clients manage these challenges. So taking that longer term strategic point of view. So if we start out at the beginner level, before we get into the story, Henry, I actually thought it would be helpful to start out just by asking you, give us a bit of information for the benefit of anyone in the audience who doesn't know yet. What is a company in solvency? Yeah, absolutely. So a company in solvency, effectively, where we have a company and it has a number of debts that are falling due or has a number of liabilities. And these liabilities and debts that this company has actually exceed another bit, level of assets that have so in effect, company cannot pay or does not have enough money to pay its debts. Thank you so much. I also want to find a link for anyone listening that has an SQE coming up. But there is lots to learn about in solvency in the SQE. So you have that to look forward to. So today's session will help maybe put some of that into context. So then, Henry, if you wanted to explain a little bit more about the story that we're talking about. Yeah, absolutely. So as you kind of mentioned, we're talking about the UK solvency service and flagging. They have seen a recent drop in the number of companies entering into insolvency. And it reported that there was 2,043 registered company in solvency in England and Wales in June 2025. So depending on this goes out not too long ago. And that was 8% lower than the number recorded in May 2025. And 16% lower than June 2024. So a year ago from the June 2025, where 2,430 companies wound up through insolvency. Thank you. So yeah, wound up is a synonym of insolvency. It's what? Yeah, the end of the insolvency. Sorry, that was me getting ahead of myself. No worries. I think wound up is also a common term. That's you. So it's good to equip our audience with some more of that bokeh. Are there any more key facts on this story to highlight at the beginner level before we move into intermediate? Yeah, I think it would be kind of useful to talk about the different types of insolvency that the company sort of the insolvency service has kind of registered and flagged. And just give a brief explanation of what some of these are, as Tori kind of mentioned, on your SQE, OPC, any new training contract. You're come across various different types of insolvency and different companies might be in different states of distress before they're ultimately kind of wound up and sort of dissolved of the company's house. Company's house days that don't know is on the database where you can basically search or basically ever register company in England as well. And it sets out all of its key information, finances, directors and everything. And it will say the company's operating or its dissolve. So we have in June 2025, it was registered, and it will 1,585 CELs, the on-credits of voluntary liquidations. And this is effectively where the directors of an insolven company voluntarily choose to wind up those company affairs. But it can only do this when it hands the agreement of the creditors, because the creditors are the people that owe money by this company. So if it's being wound up, they need to sell, see, am I going to get my money back? What percentage of my money am I going to get back? And it's probably not one for now, but just in any detail, but something that you'll learn on your SQE, your postgraduate courses or even certain modules that you're undergraduate. You have, where you have creditors, you have what's necessary to do and answer to your debt and you have various different levels. So if you're a secure creditor, you rank higher. And for example, an unscreditor, right to turn it to the bottom of the list. And what this rank is and is basically at what level you'll get your money back. But here's a Kotok money. We then work our way up the levels to say, you're secure, you'll get this, you're this, you'll get this, you're unscured, you're basically getting whatever left in the pot in anything. So unscured creditors are very much at risk when it comes to company insolvency. We also have had 330 compulsory liquidations. Compulsory liquidations are effectively a court order say is that there's companies and to liquidation. And it's where the course can basically possibly wind up a company. And this is primarily done when said company is unable or has an inability to pay its debts. We have administrations and there are 11 of those recorded. And this is effectively where a license to insolvency practitioner. Sometimes you can get all firms involved in this and this will take control of a financially distressed company. And what this then can do is look to try and manage this. And there's you always, there are ones who rescue the business if that's being sold, if that's being taken over by another organization. We'll see a lot of these in the news, particularly around like Pumman and Heifstein, Rikander, for example, if they're about to go into administration, this is where stock is being sold. So you can achieve an all to try and get money and keep that company aflates. And we also have 15 complimentary company voluntary administrative arrangement, sorry, which still has a lot of acronyms in insolvency, muslinian ad TVAs. And this is basically a way where insolven companies can kind of come up with some kind of agreement with its creditors to repaid debt that were a period of time. So this allows it to keep trading, whilst also trying to manage its debts. And ultimately, if it's not to keep trading, it can stop bringing money into the company. - Thanks so much for that overview. As you mentioned, as I mentioned, it is helpful for people to have that base level of knowledge ahead of the SQE. But then also for sure with upcoming interviews, assessment centers and future legal careers, there's a lot of work for lawyers here. So if we jump then into the intermediate level, then we can start thinking more about the issue from that legal and commercial perspective. So I thought just to start us off, I was wondering, could you give us an overview just why would it be important for commercial lawyers for aspiring commercial lawyers to understand these kinds of trends? - Yeah, for sure. As we mentioned, this is a snapshot of what in solitude centers has released an announce for June 2025, June 2025 specifically. What starts a drop in the month before a drop in the year that preceding year, it's, we should be cautious around saying, this is an ongoing trend that we're seeing at decrease, because there may be a whole history reasons why, we're seeing this decrease, it could be because some companies are delaying start a formal proceeding for an insolidate proceeding, and this could be because it's just been a year and so they kind of wanted to wait before restructuring. And that it's really important to monitor ongoing trends because we don't want to jump the gun and start advising everyone in solidate team, we don't want to start advising our clients as the decrease in solidate ex-wans that were actually the following month, that could be a temporal increase in solidate for whatever reason. And I think that's something that we want to be exercise in caution with as well as we go into our interviews, our assessment centers with our normal firms. We may be talking about this now and what's happened in 2025, or if your interview assessment is in, and say September 2025, the trends could have completely shifted the other way. So it's, it's worthwhile making sure that you're keeping on top of these and not focusing too much on just one move because that is just a snapshot in a talkment period. - Thank you so much. I think that is really helpful overall because I think our audience can apply that to other things as well. I think yet any time that you hear about a potential trend, especially if you've heard about it kind of far in advance to your interview or assessment center, it is definitely worth looking at how the trend has moved in a more in more recent times to be sure that you're giving up to date information. What would you say for people to kind of keep up with these kind of trends, what they can look for? - I think, if this is an area that you're interested in and it's an area that a lot of firms will have, I'm sorry, in Solvency team, they don't have in Solvency finance banking teams that deal with a lot of companies in a state they may also be out to credit you're trying to get the money from these companies that may be in a state of distress. So keeping on going on in the market, keeping on what the insolvency service is doing, read their publications, keep track of any sort of regulatory changes that HMRC may be looking to implement what's going on in terms of the tax landscape, and just how any changes at 2D tax as ETC may actually affect the number of businesses that go into insolvency because if taxes go up, for example, that means companies have to pay more, which means that they may not have enough to cover any liability, additional liabilities that they have, they need to be trading more, making more money. So that's something to sort of keep in mind. For sure. And something that we're working on at this intermediate level as well is trying to think of things from the clients perspective, that kind of commercial perspective, because that's what enables a person to be a really good commercial lawyer. So from a client's perspective, are there specific industries that are more at risk of insolvency and how could a lawyer assist or tailor their advice for those kind of clients? Sure. So we briefly touched on earlier in terms of a high street. So the retail sector, brick and mortar stores, especially post-cave with the way that consumers have purchasing, and buying when you've got shops like ASOS and Amazon that can deliver the same day for the most part. People aren't going to department stores in the same way that they used to. Construction also as well because of the cost of materials and you can a lot of projects, it's landstakes with countries that provide a lot of raw materials and building. It's manufacturing. There may be issues in by chain as well. So what bullfabric should do is kind of tailor their advice to these specific sectors, the retail sectors, the stock sectors. Most big firms have specialists in these areas to kind of manage any sort of workling effects that these clients may face as a result. Thank you. And I have one more question at the intermediate level. I think this one kind of straddles the line between intermediate and advanced actually because it is requiring us to take more of a big picture view. So if you take a big picture view on the kind of commercial considerations, if we're thinking global, what are some of the other concerns that might be relevant to this kind of story? I think that big one is lightening, especially in light. There was a whole discussion around this year in terms of tariffs and import and export and potential increases in cost. There can see customers, not customers, sorry, clients companies may be looking to move their supply chain elsewhere to try and mitigate this. Again, it's sort of legal and wise as lawyers to our client. We need to be aware of what's going on and how we can mitigate any potential risk of insolvency. And equally in terms of advice and client, if you are say client one and you're working with we've got a relationship, a contract relationship with another organization and there are rumblings that perhaps this company this sector struggling. If you're active for client there, what you need to be do is mitigating our clients risk if the potential cost company goes into insolvency. What does our contracts say? Do we have a way of getting out of this contract? Generally that's when you have a contract and you have the termination vision, you usually have a termination right for when the other party goes into insolvency. So make sure you're checking that because was a lot of insults it work focuses around the actual individual company is going into insolvency and how we navigate that. Those are on the receiving end and may have contracts with that they could also be our client. The how we're mitigating the risk for them if they are operating in a sector where a lot of there's a lot of insolvency has a lot of risks. So just checking that and submitting to getting the risk in that thing. Thank you. I think that's a really, really helpful illustration. I actually have how to take that step back and look at the bigger picture of it because yeah with insolvency, I think oftentimes we are talking about the insolven company and certainly the story that we're talking about today relates to insolven companies. But then of course there are other companies that have contracts with that insolven company. So that's also something to think about. So thank you so much for highlighting that. I do think that's the perfect thing to move us into the advanced level because we've already started looking a bit at the bigger picture. So if we go into advanced then a lot of the thinking that goes behind having an advanced level of commercial awareness is being able to think about the longer term strategic considerations and how lawyers would provide that value. So what would you say are some of the long term strategic considerations here? Yeah, I think one of the biggest long term strategic considerations is definitely be touched on as briefly just then a new media state. But it's the focusing on the high risk sectors focusing on industries like construction, light retail, like hospitality, where primarily we see a lot of the most part most of the insolvency, especially those that hit the risk. And what we can be doing as lawyers in the sectors in this space is particularly having an interest in this area as well as making sure that it wants to giving those clients is proactive. And it's anticipating any potential live vulnerability if they are rumbling it that's a sort of shift in the market of things are looking a big solid focusing on this letting clients know that I did not start taking that product if I was saying okay we should be looking at this. What's your liability list look like what's list of data is looking like how are the financials doing do we need to engage our finance team to we need to engage our banking team. We need to consider a refinance are we looking potentially to be acquired by a big and family company so we get and more security more safety. And so these are ways that we can be doing that. And also helps then be a lot sort of resilience and sort of getting these contingencies and lying ready for these clients should things go sour. We don't immediately have to get the insolvency guys on board and say okay well restructuring and we're lifting up or do we just go down to see the average doing to go down there various other insolvency routes could this be like court order how to be avoid doing that. Did that something that we can be doing is always to advise our client basically mitigate them from potential risks. And so you mentioned being proactive then. Are there other kinds of ways that lawyers can really be proactive in this way to help clients before insolvency becomes an issue. Yeah, absolutely. I briefly touched on it then and I think we can go to a little bit more detail where I mentioned checking with the client to see what their like benefit that that doesn't look like. A lot of firms can do office and at pre insolvency audit checking what the company is looking like. Now are we kind of looking at the level of risk that occur in are they one badge move or one purchase away or one bad month away from insolvency. What are we doing when it comes to potential restructuring. Have we thought about any planning scenarios. What could what's the industry doing how could we restructuring what are competitors going. We're going to be there at big pan company and just kind of had a more of these concerns was you plan to face. And that's where we again, we can go from the stamp of not just being reactive client cause up. Not looking great guys. We may have to think about restructuring or going into insolvency. If we can be proactive and say okay, before we even get to that stage, we've taken a look before casting or planning ahead. So we're going to be able to do a restructuring plan in place should we ever need to do it. That is a really good way that clients can get to the body from their lawyers. So you mentioned restructuring a couple of times as well as something that clients might end up doing. Are there any kind of considerations when it comes to restructuring that law firms would need to be conscious of. I mean, that's quite a big question. But does anything come to mind. I'm not a restructuring insolvency by. But there are a whole host of things that are and will want to be made aware of houses going to look. Of course, the shareholders, the directors, houses restructuring goes look. Could we just give sort of a refinancing rates. And basically doing away the company has had people if but not of the times. These or if these restructuring conversations, the insolvency conversations I have made at a point where the company is already in distress. The company does in distress and looking to. And sort of stay in the flare of in kind of. Keep trading or it doesn't want to be wound up just yet. It might be too late to have any conversations in advance. when it does or if it does, if it does. that if it does get to that point, you're less vulnerable, you're less kind of at risk than you to make decisions with a clear head because you've all kind of been in those moments where you're kind of you make decisions a lot more on sort of off the cuff because you're not prepared to not expecting it. Whereas when you're prepared, you're anticipating something you've got contingency in place, you want to do to approach that situation and calm and eat and that's something your lawyer can help you do in the state. I have one final question at the advanced level and then I'll open it up if you have anything else that you just want it to add. But I was just wondering about tech here because we're talking about being proactive and kind of anticipating and avoiding issues. Do you see tech playing a role in this? Definitely. I think tech is going to and is already embedding itself in so many aspects of an equal perfection. And I think what we're going to see is insolvency practitioners restructuring insolvency lawyers using these sort of financial modeling tools, predictive analytic ways to basically offer that. So we just spoke about the reviewing current sort of financial situation early and being proactive rather than reactive. And I think using these financial modeling tools are these sort of predictors. I'll look at our sort of enable and enhanced by AI to kind of spot the signs of the strengths to spot the signs of this is quite big. I ability instead of like a red flag. What's happening here? And so then it can help mitigate any potential and risk. So when we're using these tools, when we're having these proactive conversations with our clients, we can say this stuff that look great. Have we thought about this? X, Y, and Z, whatever that may look like, that's an individual company. And then that can stop or prevent or reduce the likelihood of mediums to go down the insolvency route. Thanks so much for outlining that. I think it is helpful to reflect on tech just because I think, yeah, when people are building their commercial awareness, they're often quite aware of the fact that tech does create these opportunities and new tech is so significant and such a hot topic issue right now. But then I think it's always useful to learn about some of the more specific ways that would actually be used. So thank you so much. Was there anything else that you wanted to add at the advanced level before we wrap up? I think the only other thing I would add is just obviously insolvency and other company lined up is very much last resort and a lot of the content impact to do effect retail hospitality and in construction. And with the none of these companies, they've got more good world reputation like brand naming like left to say warts, for example, or any of these sort of department stores that have gone under it. And so from a reputational risk as well, trying to avoid going into insolvency and am losing that kind of goodwill in relationship that you have where it's your customers out to client is huge because people are buying because they know it feels safe with this brand. And so we couldn't. For a lot of companies, that is their biggest asset. So trying to keep that brand in line is going to be a huge thing for an audience as well. That's just a kind of different angle to also consider an insolvency for. Hey, for sure. I think that's a perfect amount to conclude on as well because I think that's just another illustration of why commercial awareness is so important because as the lawyer, you might know the insolvency law back to front, but ultimately, yeah, you need to understand where your client is coming from and that their reputation, their goodwill, that is such an important thing to think about from their point of view. So thank you so much, Henry, for all of your insights today. And thank you to our audience for joining today. Remember that commercial awareness is not just about staying on top of the news and reading the headlines. It's about really understanding why these events matter to clients and how you as a future lawyer can provide strategic values to them. So whether you're at the beginning, intermediate or advanced level, the key takeaway is to approach each story with a curious analytical mindset. You want to be asking, how does this impact clients and what would a law firm do to help? And Henry has hopefully illustrated today that when you're looking at a trend, certainly you want to keep up with that trend and see how it develops and it develops in the way that we might anticipate. So, join us next week to keep all your commercial awareness and until then prepare without the panic.