Campaign launched to halt abuse of troubled companies

THE INSOLVENCY profession is being hampered in their efforts to save companies, because they believe suppliers are holding them to ransom.

Insolvency trade body R3 has launched a campaign to stop suppliers from taking advantage of struggling businesses. They hope to trigger a consultation and government debate on how to change the current position.

Currently, if an insolvency practitioner (IP) wants to continue trading a business in insolvency, the supplier can force them to make ransom payments or increase tariffs, effectively ensuring they are paid ahead of other creditors.

A roundtable discussion to kick off the R3 campaign took place yesterday and was attended by several MPs, Nick Howard director of policy at the Insolvency Service, Steven Law, president of R3, and Neville Kahn, partner of insolvency at Deloitte.

Kahn said that if change to regulation was coming it would need to be quickly. Historically corporate insolvencies have increased as the country exits a recession. A change would be needed sooner rather than later to help with the upcoming predicted rise in corporate insolvencies.

There were suggestions from the MPs present they would be happy to form cross-party allegiance on the subject.

However, Howard added getting a change in legislation can be time consuming and was not the priority for government at the moment.

“Is this issue at the top of the government agenda right now? Probably no it isn’t,” he said.

Howard added that as well as the R3 campaign, there would need to be a strong business case, a government consultation and other parliamentary procedures before a change to legislation could take place.

He added if the issue is to be successful in government there needs to be figures placed on how many companies could be saved, and how much money that could mean for the government.

“The government will want to see a strong money based case,” he said.

Howard also questioned whether R3 had explored all the options other than a change to regulation, which he believed will be one of the first things the government will ask before initating a consultation.