Trade and industry secretary Stephen Byers this afternoon unveiled a relaxation of rules that govern bankrupts that will allow honest failures to return to business within six months.
The new rules were announced just a day after a landmark the Court of Appeal ruling against two struck-off accountants opens the door for bankrupts to expect the seizure of their personal pension funds.
Yesterday’s court decision highlights a major gap between the treatment of individuals with personal pension funds and people with company schemes that are often seizure-proof foreiture clauses.
Tough provisions in Byers’ bankruptcy law will crackdown on deliberate fraudsters, with a 15 year ban for culpable bankrupts that is in line with legislation disqualifying company directors.
Bankrupts can also now expect ‘financial counselling’ and exemption of up to around £20,000 invested in a home from trustees’ claims if they can prove an equal amount was pumped into a business.
But, plans have been dropped to ditch laws barring bankrupts from public office.
‘We must remove the stigma surrounding bankruptcy’, Byers said. ‘Too many people are unwilling to set up their own business because they are worried about the consequences of failure.’
The official receiver is also set to exercise the power to run individual voluntary agreements with creditors that allow an insolvent person to avoid bankruptcy. IVAs are run by private sector insolvency practioners.
Business advisors Pannell Kerr Forster rounded on the proposals as not providing sufficient protection for future creditors.
‘The scope for accusations of injustice are enormous, given the current inadequacies in resources for the Insolvency Service and the short time in which the Official Receiver will be expected to gather information’, said John Alexander, head of corporate recovery and insolvency.
Yesterday’s Court of Appeal ruling found that creditors of barred accountants Leslie Lesser and John Dennison are allowed to strip their pension funds.Insolvency trustees can now take personal pension funds from individuals bankrupted since 29 December 1986. Lesser and Dennison may now seek an appeal to the House of Lords.
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