Retailers protected from impact of Trident ruling

The government has taken the long-awaited step of protecting companies in
administration from paying business rates on unoccupied properties.

The move reverses the effect of the Trident ruling, where the courts found
that council business rates should be treated as a preferential creditors in an
administration.

Insolvency experts warned that Trident had put back insolvency rules by 20
years and would cause many retailers to collapse.

The Insolvency Service has been mulling over the impact of Trident since
March last year to see whether the decision ran against the government’s rescue
culture.

‘We would certainly not want the rescue culture fostered by the new style
administration regime to be jeopardised, if that indeed were to be the effect of
the judgment,’ it stated at the time.

Since then, the government has decided that Trident does indeed pose a risk
to the ‘rescue culture’ and before Christmas announced a partial reversal of the
decision.

‘A permanent exemption will remove any potential for decisions about whether
to enter administration to be distorted by differences in rates liability,’ says
local government minister John Healey. ‘We are committed to the promotion of a
culture that provides opportunities for insolvent companies that have viable
underlying businesses to be rescued wherever possible.’

President of R3 Patricia Godfrey says the decision couldn’t have been better
timed for retailers: ‘With the effects of the credit crunch increasingly likely
to be felt in the New Year, this move will help administrators save business and
jobs.’

Mercer & Hole business recovery partner Chris Laughton agrees,
highlighting the credit crunch as likely to lead to more retail insolvencies.
Removing the preferential treatment on business rates for unoccupied properties
would save businesses.

‘The decision will help what will be a higher number of retail insolvencies
than last year,’ Laughton says.

Before Trident administrators stopped paying business rates on any
properties, unoccupied or not, during insolvency proceedings. Trident had tipped
the balance too far against insolvency practitioners.