Insolvency experts welcome plans

Trade secretary Stephen Byers and paymaster general yesterday announced along-delayed joint paper on company rescue, which calls for a more sympatheticuse of company voluntary arrangement to help struggling businesses get out offinancial difficulty.

A spokesman for the Association of Business Recovery Professionals, R3, said:’R3 is very much in favour of this and has been suggesting this approach forseveral years.’

The taxman and customs present the majority of petitions to wind-up strugglingcompanies or put individuals into bankruptcy.

A R3 spokesman said: ‘Over the years a major difficulty encountered byinsolvency practitioners who help formulate and oversee such arrangements hasbeen the generally unhelpful approach of crown bodies.’

Insolvency experts at PricewaterhouseCoopers said a significant increase in company insolvencies in the third quarter of 2000 underlined the need for a shift in attitudes to company under-performance in the UK.

The latest DTI figures reveal 3,776 companies went into liquidation inEngland and Wales in the third quarter of 2000, an 8.6% increase on both theprevious quarter and the same period a year ago.

Only 121 companies entered a company voluntary arrangement (CVA), wherebytroubled companies and their creditors work together to avoid formal liquidation, a decrease of 24% from the second to third quarter 2000.

Intense competition in the industrial sectors, including the retail supply chainand automotive component manufacturing, have forced a large number of small tomedium sized businesses into recievership.

Neville Kahn, Business Recovery Services partner at PricewaterhouseCoopers,said: ‘The worryingly high number of formal liquidations compared to companyvoluntary arrangements highlights the need for a more mature andcommercial approach to company failure.’

The Institute of Directors welcomed the more commercial approach from the Revenue and Customs, but added it was regrettable that the review did not end the right of both departments to crown preference, which allows them to be paid ahead of other creditors.

Voluntary arrangement were introduced in the 1986 Insolvency Act to allowindividuals or businesses to set up agreements with creditors to find a way tosurvive by writing off or postponing debts.

R3, this year changed its name from the Society of Practitioners of Insolvencyto the Association of Business Recovery Professionals in a bid to be seen tosupport company turnaround rather than closure.


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