The Average number of monthly corporate insolvencies across the UK prior to the Covid-19 crisis was approximately 1,500. During the lockdown, the number of insolvencies across the UK have reduced significantly and in June there were only 732 corporate insolvencies. This reduction is largely as a result of the support measures introduced by the Government.
However, recent research suggests that there are in excess of 500,000 companies in financial distress across the UK. Thor Office for Budget Responsibility estimates that 30% of those companies which have applied for Bounce Bank Loans will be unable to repay them. There is likely to be a substantial increase in the numbers of insolvencies during the latter part of this year.
Look at how your clients are remunerating themselves (if they are able to do so during the Covid crisis). Many companies have taken on additional debts during the course of the pandemic and many companies will have seen their turnover decline. This means that some of your clients will have insufficient reserves to pay the dividends and consequently these unlawful dividends may be reclaimed if these clients are subsequently placed into an insolvency process. If clients are having to repay the unlawful dividends they will often look for someone to blame.