According to a government statement, the proposals included in the Insolvency Bill will:
Give small companies in short-term financial difficulties some breathing space to put a legally binding rescue plan to its creditors; and
speed up the current process for disqualifying unfit directors, safeguarding the interests of the public and the marketplace.
Trade secretary Stephen Byers said: ‘Promoting entrepreneurship and responsible risk-taking in the UK is a key element in fostering a more competitive nation. The new regime proposed in the Insolvency Bill would help to achieve that.
‘This Bill strikes the right balance of protecting the rights of consumers and creditors, improving the insolvency system and allowing financially troubled firms some breathing space in an increasingly competitive business world.’
‘To help stop fundamentally viable businesses going to the wall, this Bill introduces a moratorium for firms in financial trouble using Company Voluntary Arrangements (CVAs). This means that managers of around 500 small firms a year could have the breathing space needed to put a rescue plan to creditors without fear of legal action.
‘This will benefit the management, workers, creditors, suppliers and the wider economy.’
The Bill also proposes changes to the way directors are disqualified.
‘At present there can be lengthy delays while the courts disqualify someone from being a director. This Bill will introduce a fast-track system where, if the director agrees, disqualification can be done administratively rather than through the courts.
Mr Byers also announced that the Government has decided not to proceed with an initial proposal to require floating chargeholders to give a period of notice before the appointment of an administrative receiver.
Mr Byers said: ‘Following consultation on the proposed changes, and listening to the views of the Trade and Industry Select Committee, that proposal is not included in the Bill.
‘There was concern that company rescues might be thwarted where, for example, a bank acted over-hastily and appointed administrative receivers before a voluntary agreement could be agreed.
‘Views suggested that in practice, receivers are only appointed following discussions with the company and attempts to rescue it, or where there is a well-founded fear of fraud or malpractice. However, I will be looking to banks and other financial institutions to make sure that any such problems do not occur in future.’
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