Call for better staff deal in insolvencies

Reacting to last week’s dramatic proposals to shake-up the UK’s insolvency regime, Phillip Sykes, senior corporate recovery partner at Moore Stephens, welcomed the removal of crown preferential status, but said the government should now move to improve employee preference status. He also said it should remove legislation which forces buyers to pay the redundancy costs of a troubled company which they have bought.

These twin moves, he argued, would increase the amount of money staff get when companies go bust, and improve the chances of the business being rescued.He explained that, under current legislation, employees are entitled to £800 in arrears and holiday pay as preferential creditors, but anything related to pay in lieu of notice or redundancy pay becomes unsecured credit.

‘That status is well overdue for revision to a more realistic figure,’ said Sykes.

He added: ‘It seems to me that if we?re looking at doing away with crown preference, the other thing that would help insolvency practitioners is that we should do away with Transfer of Undertaking Protection of Employment (TUPE) regulations.’

TUPE regulations apply to all sale-related redundancies, including those that occur during administrations.

Sykes added that in restructuring businesses for sale, IPs are looking to sell businesses quickly and often have to make staff cuts, and the fact that the purchaser picks up all restructuring costs can put potential buyers off.

He said: ‘If you are looking at older companies like Cammell Laird the cost of restructuring is more than anyone is prepared to pay for the business. What I?m suggesting is that the government improve the status of employees.’


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