Management is blamed for most company failures

 

LIQUIDATIONS could be avoided if companies in financial difficulties faced up to their problems earlier, according to a survey by the Institute of Chartered Accountants in Ireland.

The survey of insolvency practitioners found that, in a quarter of cases, liquidation could have been avoided if action had been taken earlier to sell the business as a going concern in order to stem financial losses. But in 63 per cent of cases the reason for the failure made it impossible to restore the business to viability.

A negotiated compromise would have provided a realistic prospect of survival in only 10 per cent of cases, according to the survey, which did not include members' voluntary liquidations. Management failure was a principle cause of 62 per cent of corporate insolvencies, while the collapse of the other 38 per cent was due to market factors.

Insolvency practitioners estimated that 61 per cent of companies would be able to discharge up to 5 per cent of their total liabilities. About 10 per cent would be able to discharge more than half of their liabilities, the survey found. Five per cent of the companies were restored to solvency and 5 per cent were sold as going concerns.