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09/07/2010

Bad management to blame for nearly 60% of corporate insolvencies

‘Incompetence or bad management’ of company directors causes 56% of corporate failures, while nearly 40% of businesses could have been saved if professional advice had been sought earlier, according to a poll of insolvency experts carried out by insolvency trade body R3.

R3’s President Steven Law commented:
“Regardless of the economic circumstance, no business will survive with poor management in place. I have seen a good workforce let down and sometimes laid off due to management which do not admit and correct their mistakes.”

R3’s research also reveals that a further 60% of insolvency practitioners think the UK’s insolvency regime is overly forgiving towards directors who fail and over half think all directors should receive mandatory financial education before they even open a business.

However, R3 members believe there are some lessons that can be learnt from the experience as 74% of insolvency practitioners believe corporate failure can drive directors to be more successful. A staggering 84% of IPs also believe it can heighten business acumen.

Steven Law concluded: “For some directors, the experience of failure can clearly drive them onto greater successes, but I would share concerns that the current regime is, if anything, too forgiving to directors who have failed. Clearly it would not be practical to educate every director before they are appointed, but there must be enough checks and balances to ensure that directors of failed companies should not put creditors and jobs at risk if they are allowed to repeat their mistakes."


Methodology note: 

  • For the figures in the first paragraph, between the 10 and 26 of May 2010, ComRes conducted an online survey of R3 members in the UK. The survey was sent to 2082 IPs, of whom 329 responded. This means that approximately one in six of those eligible to take part did so.

  • For the other figures, between the 4 and 23 of February 2010, ComRes conducted an online survey of R3 members in the UK. The survey was sent to 2082 IPs, of whom 404 responded. This means that approximately one in five of those eligible to take part did so. For the full tables please go to ComRes at www.comres.co.uk ComRes is a member of the British Polling Council and abides by its rules (www.britishpollingcouncil.org ).

R3 Press Office

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see www.r3.org.uk for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.