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Bankruptcy: A Fresh Start

Annex A

Official Receivers’ Survey of Business Failures – January and February 1999

Official Receivers in England & Wales were asked to conduct a survey of business failures in respect of cases that they reviewed in January and February 1999.

The reviews were carried out, 28 days after the date of the Winding-up Order (companies) or Bankruptcy Order (individuals), by Deputy Official Receivers. They were asked to determine from information available at that stage:

1.

The main cause of failure;

2.

The age of the bankrupt, principal partner or director; and

3.

The number of years that the company or business had traded.

Both individual bankrupts and the directors of companies subject to compulsory liquidation proceedings were included in the sample population although individuals made up the largest group. Many small companies are operated on the basis that they are, in practice, "incorporated sole traders". The causes of failure of such businesses were felt to be likely to reveal just as much as those of unincorporated traders.

The reliability of the information obtained is, to a large extent, dependent on the quality of the answers given by the "debtors" at interview or in written response to the standard questionnaires that are required to be completed in every case. Consequently, out of 1698 cases included in the survey, the information was not always available at the 28-day case review stage.

Main Cause of Failure

Age of Bankrupt, Partner or Director

Average Number of Years Traded

YES

NO

YES

NO

YES

 NO

Number of cases in which information was available at 28 days

 

1412

286

1473

225

1309

389

Main Reason for Failure of the Business

Deputy Official Receivers were asked to classify the main cause of failure from a pre-determined list – they were only allowed to give one response, and if more than one category was selected the response was disregarded. The various classifications for the reasons for the businesses failure were selected from past experience of case work and were:

1. Bad debts;

2. Fraud by Debtor/Partner or Director;

3. Fraud by 3rd Party;

4. Legal Disputes;

5. Loss of Market/Main Customer;

6. Rent review/other increased overheads;

7. Failure to deal with VAT affairs;

8. Failure to deal with Income Tax/Corporation Tax affairs;

9. Poor Management;

10. Lack of working capital/poor cash flow;

11. Loss of long term finance;

12. Personal extravagance/excessive drawings or remuneration;

13. Guarantees given to lenders;

14. Other reasons (commercial or otherwise).

The age classifications for the bankrupt principal partner or director were:

1. Less than 25;

2. 25 to 35;

3. 35 to 45;

4. 45 to 60;

5. Over 60.

The results of the survey are summarised in terms of the number of cases that fell into a particular category in the attached charts.

Image depicting the average number of years busines traded

Image depicting the average age of bankrupt/director

Image depicting a survey of causes of failure

[Foreword] [Responses To] [Executive Summary] [Section 1] [Section 2] [Section 3] [Section 4] [Section 5] [Section 6] [Section 7] [Section 8] [Section 9] [Annex A] [Annex B] [Glossary of Terms]