Since the beginning of the health crisis, the various public support measures for businesses have led to a drop in insolvencies. As a result, the restructuring sector, which brings together all the professionals specializing in helping companies in difficulty, is running out of companies to rescue, and is therefore idling.
Falling business failures shake up restructuring sector
At a time when the French economy has been hit by the health crisis, the number of business failures has never been so low, despite the gradual end of various government subsidies.
In Q3 2021, 5,311 insolvency proceedings were opened, 20.8% fewer than in Q3 2020. At the end of September 2020, 37,000 judgments had been handed down, compared with just 28,000 at the end of September 2021, half as many as before the start of the Covid-19 pandemic.
Professionals in the restructuring sector, whose job it is to help companies in difficulty, were prepared for a wave of insolvencies.
Court-appointed receivers and administrators, commercial courts, specialized law firms, auctioneers, bailiffs specializing in debt collection, interim management firms: all had anticipated a sharp rise in activity, and increased their workforce accordingly. And yet, with a shortage of cases to handle, the restructuring sector is now slowing down.
Court-appointed trustees in need of cases
Those most affected by the fall in the number of business failures are administrators and judicial representatives, who specialize in collective procedures ranging from safeguard to liquidation, as well as in out-of-court procedures.
In France, the only country where this profession exists, there are 500 of them, employing a total of 3,200 people. While the 2008 crisis benefited them, the Covid-19 health crisis did not. Their average sales fell by 12.6% in 2020, and two-thirds of studies had to resort to state-guaranteed loans.
Furthermore, whatever the situation of companies in the coming months, the drop in income for administrators and judicial representatives will continue until 2023, due to a billing lag of one to two years.
According to a survey by the Institut français des praticiens des procédures collectives (IFPPC - French Institute of Insolvency Practitioners ), by the end of 2020, 90% of trustee firms will have seen their business fall by at least 30% in one year. Despite a 14% reduction in payroll since the start of 2020, one professional out of two plans to reduce staff numbers still further.
While the files of large companies such as Celio, Planet Sushi and Comexposium are coveted by some restructuring professionals, those accustomed to dealing with the files of VSEs and SMEs are in the most difficulty in the current context.
At the same time, commercial courts have sharply reduced the number of hearings reserved for restructuring cases, as in Versailles, where only 4 cases are dealt with each week, compared with 30 to 40 under normal circumstances.
Court-appointed auctioneers and bailiffs specializing in debt collection, responsible for inventorying and reselling moveable assets in bankruptcy proceedings, are also impacted by the fall in business failures.
Among the sector's various professionals, the ones doing best are the interim management firms. Before the onset of the health crisis, restructuring accounted for only a small proportion of their business, averaging between 10% and 20%. Specialized lawyers are also doing well, focusing on M&A and transformation consulting.