European Commission looks to avoid ‘honest’ corporate insolvency

Published on June 22, 2012 by Crawfords Accounting

The European Commission has revealed that it is to publish an Entrepreneurship Action Plan in autumn 2012, part of which addresses the problem of corporate insolvency for ‘honest’ reasons.

According to the Commission, 96% of all bankruptcies are caused by what it calls ‘honest’ reasons – for example, a catastrophic impact on liquidity and cashflow resulting from late payments.

Corporate closures can also have a significant effect on employment, it adds, with 600,000 jobs lost at 150,000 companies each year, not only due to corporate insolvency, but for other reasons like owners retiring or moving elsewhere.

The Action Plan is also focusing on three key groups to help make sure diversity and experience are retained in entrepreneurial settings – including elderly workers, women and young people.

Whereas older people have the experience needed to set up a successful company from scratch, younger people often do not do so unless they received formal ‘entrepreneurship’ training at school, the Commission says.

Similarly, many women face barriers to setting up for themselves, leading them to constitute only around one in three self-employed individuals in the EU.

With all of these efforts combined, it is likely that the rate of company insolvency could drop in the EU in the coming years – and we will be making sure that our bankruptcy advice keeps pace with any guidance issued by the European Commission.

 

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