With insolvency cases, the devil is in the detail
Stuart Clubb suggests encouraging figures should be treated with caution
As the saying goes, the devil is in the detail. It is tempting to be cautiously optimistic, with the recent Scottish company insolvency figures released by the Insolvency Service showing a 23 per cent reduction in August 2026 compared to August 2025. Following a period of elevated insolvency activity, the Accountant in Bankruptcy (AiB) figures (April-June) also showed a year-on-year 27.7 per cent fall in corporate insolvencies.
However, the stark fact remains that corporate insolvencies remain above pre-pandemic levels and many businesses continue to operate in a challenging economic environment. As if to underline this undercurrent of financial pressure and the mixed picture of the insolvency landscape, personal insolvencies increased 12.8 per cent in the last quarter. Indeed, against a backdrop of increased formal personal insolvency procedures, bankruptcies were up 15.2 per cent and Protected Trust Deeds rose by 11.4 per cent.
However we choose to interpret these statistics, from a legal perspective there’s no doubt that established insolvency and debt solution practices remain key to helping businesses and individuals navigate through times of financial distress. Indeed, I’d argue the scale of rising personal insolvencies and the continuing challenges faced by many sectors of industry suggest that the economic picture remains more nuanced than the headline reduction in corporate insolvencies might imply. It also underlines the practical importance of Scotland’s statutory insolvency and debt-management framework.
It may seem obvious, but businesses facing financial turmoil should seek professional advice at an early stage. While corporate insolvencies have fallen, the current Scottish insolvency landscape continues to be dominated by traditional insolvency procedures. For example, of the 73 company insolvencies registered in August, 65 were liquidations. More broadly, there have only been a handful of restructuring plans and company moratoriums in Scotland since their introduction in 2020. This suggests that liquidation remains the predominant route for dealing with corporate financial distress.
It’s also worth considering why the newer restructuring plan and moratorium procedures introduced under the Corporate Insolvency and Governance Act 2020 have, to date, seen relatively limited use in Scotland. While these measures were designed to support business rescue and restructuring, this may reflect the fact that they are often better suited to larger and more complex restructurings. Hence, many distressed businesses continue to rely on more established insolvency and restructuring solutions.
However, if traditional insolvency processes continue to dominate in Scotland, technological evolution is now very much the buzzword in our insolvency circles. Across the insolvency and legal sectors, practitioners are increasingly exploring how technology, including artificial intelligence, can help support clients, improve service delivery, streamline workflow processes, and enhance efficiency.
Of course, we must also remain cognisant of the associated risks, including the accuracy and reliability of AI-generated outputs, the handling of confidential client information, and the potential for over-reliance on technology where professional judgement remains essential. Embracing and managing the risks of technological advances will be among the themes I will address at the Insolvency Practitioners Association (IPA) Scotland Roadshow, hosted by Shoosmiths Scotland in Edinburgh on 21 October 21.
That Roadshow, which will also include a legal and case-law update from Shoosmiths, promises to be enlightening for our profession. Unfortunately, it remains far more nuanced how we should choose to interpret the recent fall in corporate insolvencies. As ever, the devil is in the detail.
Stuart Clubb is a partner at Shoosmiths Scotland specialising in insolvency and restructuring