PracticeConsultingBankruptcy fears grow over reform plans.

Bankruptcy fears grow over reform plans.

The number of businesses going to the wall could increase as a result of bankruptcy proposals in the government's white paper designed to encourage enterprise in UK, according to professionals at the insolvency association R3, writes Adriana Zea.

Stephen Gale, president of the body, criticised the paper’s suggestions for reforming insolvency law, saying it would increase bankruptcies and undermine efforts to persuade more people to seek voluntary arrangements.

‘Any promotion that bankruptcy is a good option can have negative repercussions on the economy,’ said Gale, ‘I think there’s a lot of headline-grabbing (in the paper) but there is not a lot of in-depth thinking behind it.’

‘Anything that increases the incidence of bankruptcy will by definition reduce the incidence of voluntary arrangements.

‘Our statistics show that two bankruptcies produce one more bankruptcy,’ he added.

The white paper is the latest document from the DTI under trade secretary Stephen Byers and also proposes that the maximum ban for disqualified directors be raised to 15 years.

Gale added: ‘The best way to reduce bankruptcy is to promote the voluntary arrangement, which has all the solutions the government is looking for.’

The white paper can be found at www.dti.gov.uk/opportunityforall and comment at www.r3.org.uk.

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