Financially distressed businesses can file for a bankruptcy or a proposal, which together is classified as insolvency.
A business that enters a formal process, or against whom an order has been made to sign over their assets, as they cannot meet their financial obligations. This will be recorded on the debtor’s credit file, making it difficult to obtain credit in the future.
An insolvent business offers to repay, in whole or in part, the amount owing to its creditors, often for a reduced payment plan.
- There were 18 cases of business insolvencies in Peel Region in Q1 2021 compared with 15 cases in Q1 2020.
- Relative to Q1 2020, net liabilities associated with business insolvencies also increased in Q1 2021.
- The reinstatement of COVID-19 pandemic restrictions will likely contribute to higher business insolvencies and associated net liabilities in Peel in 2021.
The total number of business insolvencies recorded in Peel increased from 15 cases in Q1 2020 to 18 cases in Q1 2021.
The higher number of business bankruptcies was the source of the increase in business insolvencies in Q1 2021, as commercial proposals, the other business insolvency sub-category, declined.
Compared to the number of cases registered over the last decade, the number of insolvencies in Q1 2021 remained relatively low.
The availability of federal and provincial government supports to impacted businesses, dampened the impact of the pandemic on business insolvencies in Peel.
Federal government supports for businesses are set to end in December 2021, after which business insolvencies are expected to increase.
The number of business bankruptcies in Peel Region increased from 8 cases in Q1 2020 to 12 cases in Q1 2021.
At 12 cases, the number of business bankruptcies in Peel remained relatively low.
As vaccination rates increase and more businesses are allowed to reopen, Peel business sector is expected to reopen and return to its long-term growth path.
The number of commercial proposals decreased from 7 cases in Q1 2020 to 6 cases in Q1 2021.
Net Liability of Business Insolvencies
Relative to Q1 2020, total net liabilities of business insolvencies increased by 266 per cent to $34.9 million.
Net liabilities of insolvencies per case increased by 205 per cent in Q1 2021.