The insolvency profession's trade body added the reforms could damage small businesses and creditors. The proposed measures 'will turn one of the most flexible systems in the world into something much more rigid'.

In the field of personal insolvency, the Bill reduces the bankruptcy period for 'honest' bankrupts from three years to 12 months. R3 said this will have a detrimental effect on returns to creditors. It could have the adverse effect of making bankruptcy more appealing to directors than individual voluntary arrangements, which can last between three and five years, and on average return 40% more money to creditors.

Although the government believes a shorter bankruptcy period will remove the stigma of bankruptcy, according to R3, the real stigma is a bad credit record.

The Bill is also expected to increase the maximum penalties to 'dishonest directors' to up to 15 years.

Links

R3's website