PracticeConsultingThe Insolvency Bill 2000 may precipitate liquidation

The Insolvency Bill 2000 may precipitate liquidation

The new insolvency bill could precipitate liquidations instead of simplifying matters, over half of London's small and medium sized enterprises say.

According to a recent survey conducted by Henderson & Company, 52% of SMEs questioned believe taking advantage of the 28-day moratorium on debts that the insolvency bill offers could increase difficulties.

The act stipulates that companies taking advantage of the moratorium must print they are doing so on every invoice, order and business letter they send. The majority of companies surveyed said this ‘is bound to make suppliers and other creditors wary of doing business’ and could precipitate liquidation.

This outweighs the benefits of giving SMEs facing financial hardship 28 days to reorganise their affairs without having to deal with creditors.

‘A way round the problem,’ said Grant Jones, deputy chairman of the London Society of Chartered Accountants, ‘would be for the Chancellor to tell the Inland Revenue and Customs and Exercise to be less aggressive in pushing for debt repayments. There also have to be less restrictions in no-fault situations such as the present agriculture crisis.’

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