ICAS CALLS ON GOVERNMENT to change insolvency laws to give greater protection to some unsecured creditors.
The Scottish institute suggested the government introduce legislation to protect consumers who have paid a deposit or purchased vouchers when a retailer collapses.
In the last year a consumers lost out when high profile companies such as Zavvi, Land of Leather, MFI and Farepak Foods entered administration, as vouchers and deposits are no longer redeemable.
ICAS is requesting new rules to force retailers to hold deposits and vouchers in a separate bank account that is not available to offset borrowing and ring-fenced for these creditors.
The recommendation is included in ICAS's response to a recently closed Insolvency Service consultation on recommended changes to the profession's regulation and legislation.
Ann Condick, (pictured) director of insolvency at ICAS, said: "This would be a bold move by government and it would need to consider how the requirement would work for smaller businesses who may not find it easy to operate a separate bank account.
"However, it is legislation that, with careful consideration, would be extremely beneficial for consumers and other unsecured creditors. We have witnessed a rise in high profile retail insolvencies over the last few years with some consumers losing out over the Christmas period which can be a difficult time for businesses and members of the public alike.
"Legislation of this nature would go some way to ensuring better returns for as many unsecured creditors as possible."
Well done ICAS for raising this topic.However their solution will threaten many businesses that rely on deposits to fund the acquisition or manufacture of the product.It will also not protect consumers when a company does not adopt such a system.What is needed is a system similar to the protection given to employees for their arrears of pay etc funded by government and if necessary paid for by a tax on consumer businesses.
Posted by: W John Kelly, 11 May 2011 | 08:17
It would also be prudent to include prepaid school, college and university fees in any proposed protection legislation.
Posted by: Tony Cormack, 12 May 2011 | 16:03
About time that the FVC has been calling for this for a number of years.
Posted by: Louise McDaid - Chair Farepak Vicitims Committee, 20 May 2011 | 19:22
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