PracticeConsultingReality of Insolvency Bill may not live up to the hype, MPs warn

Reality of Insolvency Bill may not live up to the hype, MPs warn

An influential all-party Commons committee has clashed with the Department of Trade and Industry over the scope of the draft Insolvency Bill.

The Trade and Industry Committee demanded the removal of three key clauses andserious consideration of changes to a fourth.

In a toughly-worded report, the MPs backed the idea of moratorium to givesmall and medium sized companies a chance to be rescued, while warningthat the results may be less than hoped for.

But they called on the Government to:

(i) drop a clause giving the Secretary of State for Trade and Industrypower to extend moratorium to cover large firms as well;

(ii) scrap a clause giving power to draw up regulations requiring securedcreditors to give warning before appointing an administrative receiver;

(iii) reconsider empowering the Secretary of state to authorise accountantsand other professionals other than insolvency practitioners to act asnominees or supervisors for a moratorium or a company voluntaryadministration; and

(iv) give further consideration to the proposed blanket ban on a nomineesubsequently acting as a receiver or in some other capacity towards theclient company.

The MPs also questioned giving creditors the right to take actionagainst a nominee.

And they urged more consideration before using the bill to guaranteewidows can retain property held jointly with a deceased debtor.

The committee, chaired by Scottish Labour MP Martin O’Neil,said the Bill was a modest but worthwhile measure but warned its results’may be rather less than its advance publicity suggests’.

They said lack of finance for CVAs was the biggest problem – togetherwith the insistence of the Inland Revenue and Customs on payment of taxesdue and of local authorities on the payment of rates which ‘means thatCVAs often failed in cases where a bank would otherwise be supportive’.

The MPs felt: ‘The proposed moratorium is welcome, but it is not a panaceafor companies in difficulty and for many companies the subsequent CVAprocedure would be wholly unsuitable.’

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