PracticeConsultingCompany rescue proposals unveiled

Company rescue proposals unveiled

Three months late and a week after the second reading of the government's Insolvency Bill, trade secretary Stephen Byers and paymaster general DawnPrimarolo yesterday unveiled a long-awaited review of company rescue mechanisms.

The government claimed it wants major creditors to show ‘sympathetic consideration’ towards businesses that have hit short-term financial difficultyand help their chances of survival.

A London Business School study of three of the major UK clearing banks this week showed that three-quarters of companies that hit financial difficulty emerge from bank supervision and avoid formal insolvency procedures.

The delayed DTI/Treasury review is one part of a general shake-up of the personal and corporate insolvency culture, that has come under fire from insolvency experts as patchwork, but the government has paraded it as a bid towards instilling a US-style entrepreneurial culture in the UK.

The Commons last week gave a separate Insolvency Bill its second reading, which aims to offer a 28-day moratorium on creditors rights to give small businesses a breather, and a review of personal bankruptcy procedures earlier this year.

The Inland Revenue and Customs & Excise are the main targets of the government review, and are two of the major UK creditors responsible for putting companies out of business.

Byers and Primarolo recognised that the taxman and Customs often ignore the long-term viability of a company in order to secure payment on crown debts and needed to be more consistent in their handling of the problems businesses in trouble have meeting their debts for tax and NIC.

However, changes will not take effect until April next year, when a new joint Revenue and Customs unit will oversee each company voluntary arrangement plan put forward by businesses in difficulty and draw up a timetable for both departments to stick to when dealing with CVAs.

Byers said: ‘The review group did consider abolition of crown preference but recognised that unsecured creditors would not necessarily gain from its abolition, because any monies would often go to floating charge holders.’

Other options under review include allowing courts to make temporary administration orders to wind up trading companies, a set of financial health checks for small companies and the removal of the right of a floating charge holder to veto administration orders.

Links

Insolvency Bill threatens City deals

Insolvency Bill on collision course

Related Articles

5 tips for SMEs to protect cash flow

Accounting Software 5 tips for SMEs to protect cash flow

5m Alia Shoaib, Reporter
Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

Consulting Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

11m Stephanie Wix, Writer
Managing partner Q&A - the year ahead: Richard Toone, CVR Global

Accounting Firms Managing partner Q&A - the year ahead: Richard Toone, CVR Global

12m Kevin Reed, Writer
Deloitte 'self-imposes exile' on government contracts to defuse PM row

Accounting Firms Deloitte 'self-imposes exile' on government contracts to defuse PM row

12m Kevin Reed, Writer
Managing partner Q&A - the year ahead: Julie Adams, Menzies

Accounting Firms Managing partner Q&A - the year ahead: Julie Adams, Menzies

12m Kevin Reed, Writer
Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

Business Regulation Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

1y Kevin Reed, Writer
Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

Audit Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

1y Kevin Reed, Writer
New head of equity capital markets for KPMG

Accounting Firms New head of equity capital markets for KPMG

1y Stephanie Wix, Writer