Bill delay could cause insolvencies

Thousands of businesses will run the risk of going under if the Enterprise Bill, containing crucial reforms to insolvency legislation, is delayed for a year as experts fear.

Originally, the Bill was expected to be passed in the spring of 2003.

But insolvency practitioners believe the Bill will be delayed for another year, because the government is still reconsidering fundamental issues.

One of the effects would be to allow crown preferential status to remain applicable until 2004, making it more difficult for businesses owing money to the Inland Revenue and Customs.

The preferential status will go as a result of the Enterprise Bill which has prompted a ‘hard-line’ approach to debts from tax collectors since it was announced.

Tony Supperstone, head of business recovery at BDO Stoy Hayward, told Accountancy Age: ‘The delay is a bitter-sweet pill for insolvency.’

He added that, although the government has quite rightly taken into account relevant views, it means uncertainty on the introduction of new much-needed reforms.

As late as January, the Insolvency Service was making changes and amending the proposed reforms including new proposals for the streamlining of administration.

John Alexander insolvency partner at PKF said there were some ‘dramatic changes in the proposals’.

The delay could also force the government to decide how a case currently in the New Zealand courts – the Brumark case – will affect UK insolvency practice.

The case – which will determine whether the Crown gets first claim on an insolvent company’s assets – could force the UK government to proceed with test cases in the British courts. A test case would decide whether the Crown can recover its debts ahead of banks with fixed charges against a failed company.

A department of trade spokesman said the Bill would be introduced in this parliamentary session.