Conservatives push for US style insolvency reforms

Conservatives push for US style insolvency reforms

The Tories push for radical changes to corporate insolvency rules

The conservative party would like to implement a US chapter 11 style
corporate insolvency reform to the UK market.

David Cameron has said that he would like to establish ‘breathing space’ for
businesses in order to create new funds, restructure the business and save more
jobs.

Cameron said on the BBC Radio 4 Today Programme: ‘Instead of companies going
straight into liquidation and having to lay off staff, they get a stay of
execution and they can be restructured to try to save the business, to try to
save the jobs.’

The reforms will mean companies are protected from creditors which will help
towards curbing job losses and will allow it time to implement restructures.

Gilbey Strub managing director of the European High Yield Association, which
represents banks, investors and insolvency experts, said: ‘It will allow
fundamentally sound businesses to quickly regroup and restructure themselves as
sustainable, profitable enterprises that contribute to the British economy.’

The Tories are currently looking into which aspects they would incorporate
into the UK. Advisers seem to have focused on three areas: an automatic stay of
enforcement of debt by creditors; priority funding for distressed companies; and
a binding agreement set by the court and the majority of creditors to stop
creditors vetoing desirable restructurings.

Strub said: ‘Modernising the insolvency laws is the most concrete step the
government can take at this time to counter the downturn and to stimulate the
provision of debt capital for high growth companies.’

Further reading:

Time
for change in insolvency law

Insolvencies
on steep rise

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