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Shadow insolvencies

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Are you aware of the description “shadow insolvency”? Probably not but essentially it is an insolvency where there are absolutely no realisable assets. This Credit Today piece highlights concerns raised by Insolvency Practitioners Moore Stephens. Apparently this accounts for over 3000 businesses a year

Not good if you are a creditor. However I am also tempted to retort “so what?’

Frankly there will always be businesses that sink without any assets on the balance sheet. The other side of the coin is that they may not have had any real liabilities too but the very nature of certain enterprises is that they can operate without any material balance sheet assets. A good example of this would be a recruitment company which leases an office, equipment and furniture.

The suggestion is that this is a case of virtual fraud by the directors but any failing service business can runs up a few debts which is not for one moment to say they are not acting with best intentions

And the creditors have ample opportunity to credit check. I feel as though that is something I repeat on this blog every week

Of course in such cases there are no resources to fund an insolvency practitioners liquidation. Far be it for me to suggest that is the real issue here….

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