The government has rejected a plea from the ICA to make it easier for companies in trouble to win a breathing space to plan a rescue.
The ICA proposal would have lifted the requirement for a nominee to express an opinion about the likelihood of a rescue before full plans have been drawn up and funding obtained.
Corporate affairs minister Kim Howells insisted new legislation providing for moratoriums designed to promote rescues should take effect only after a nominee has given his opinion that there are reasonable grounds for confidence that a voluntary arrangement is likely to be approved and implemented.
Howells said the Insolvency Bill – given final approval in the Commons – only requires nominees to express an opinion as to whether what is likely to be put to creditors would be workable, not whether the directors’ actual proposals are likely to be approved and implemented.
He said: ‘The requirement is important because the moratorium is not intended to be a refuge for hopeless cases.’
He added: ‘If a company is to have the benefits afforded by a moratorium there should be reasonable grounds for confidence that a voluntary arrangement is likely to be approved and implemented.’
The ICA’s position was put to MPs by shadow corporate affairs minister Christopher Chope, who warned that it believed ‘that a moratorium may be needed urgently to give time for a nominee to sit down with directors and others to find out whether proposals can be put to a creditors’ meeting with a chance of acceptance, and a limitation on the possibility of making the protection of a moratorium available simply on demand’.
The ICA said: ‘We consider all that should be necessary to obtain a moratorium would be a requirement for the directors to submit to the court a petition giving the reasons why a moratorium is necessary, the name of the nominee and a letter of acceptance from the nominee and a funding proposal for the 28 days of the moratorium.’
The Tories did not press the issue to a vote.
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