Insolvency profession remains defiant

The case, which was settled late Friday evening, has sparked a ferocious debate in the insolvency world after Land Rover took out an injunction against UPF’s administrators KPMG when they demanded £35m for teh company to continue providing Land Rover with chassis.

In the settlement, Land Rover acquired UPF’s debts and replaced KPMG with Grant Thornton as the administrator.

Many industry spectators believe the case will make insolvency practitioners think twice before using hardline tactics with large companies. Land Rover wants to see a more US-style insolvency procedure protecting companies from creditors.

But Keith Goodman, president of the Insolvency Practitioners Association, insisted insolvency practitioners would not be frightened off as these disputes tend to work on a case-by-case basis.

He said: ‘An insolvency practitioner will always try to use whatever commercial advantage that he can for the good of a company’s creditors.

‘No insolvency practitioner is going to try to sell a company unless he puts it onto a profitable footing. There’s no point in making a company survive if it’s going to make losses. In the long-term the company will not survive.’

He added that an exclusive supplier should understand the commercial reality of the situation: ‘If a customer prices himself out of the market, the company won’t survive.’David Buchler, vice-president of R3 the association of business recovery professionals, doubted the case would change matters.

‘Insolvency practitioners have a duty of care to their company and creditors and each circumstance is different in how they will interpret that duty of care to the best advantage of all concerned,’ he said.

But Phillip Long, head of business recovery at PKF, disagreed with these views. ‘You can’t hold big customers like Land Rover to ransom. These people have very big pockets,’ he said.

‘It’s undoubtedly set a precedent. It’s going to make administrations more cautious. They are going to try to negotiate a settlement without holding a customer to ransom.’

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