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UK businesses losing up to £200m due to ‘shadow insolvencies’

Posted: 10th December 2014   In: Debt Collection Services

A leading accountancy firm has estimated that companies and organisations in the UK could be losing up to £200m as a result of ‘shadow insolvencies’.

A ‘shadow insolvency’ is a term for when a company becomes insolvent but doesn’t disclose any assets when it enters liquidation. This means there is no money to pay to creditors.

Up to 3,000 businesses could have entered a shadow insolvency in the past year, according to research from accountancy firm Moore Stephens.

Moore Stephens estimates that this could have cost creditors including HMRC up to £200m. It believes the problem could be even greater because the process means there are fewer companies registered as liquidated through a formal insolvency process.

David Elliott, partner at Moore Stephens, said: “Too many businesses are disappearing with no assets and creditors must be concerned as to why that is the case.

“An increased budget for investigation work carried out by the Insolvency Service against suspect company directors would send out a powerful message to discourage unscrupulous behaviour in the first place.

“This would help to create a level playing field for businesses that publish regular accounts and that don’t try to play the system.”

Please contact Thomas Nolan for more information about the issues raised in this article or any aspect of credit control and debt collection.