MPs move to protect unsecured creditors

Pressure is mounting at Westminster for “fairer” rules governing the
distribution of assets from bankrupt businesses.

A motion calling for a change in the law to improve the position of unsecured
creditors put down by Labour MP Gordon Banks has so far secured backing from 30
MPs across the party divide.

The MP is also looking to weaken the rights of banks, the main creditors and
administrators in the process.

It complains existing laws “fail adequately to protect unsecured creditors”
and calls for changes ” to promote opportunities to deliver a greater return
from insolvent estates to unsecured creditors”.

Banks said insolvency law disadvantages small companies who are owed money
when a client is made insolvent.

He said: “Secured creditors and insolvency companies are at the front of the
queue when a company’s assets are being distributed and far too often there is
nothing left in the pot when it’s the turn of unsecured creditors to receive
money owed.

“We need to design a new system where unsecured creditors, often the small
and vulnerable businesses, are able to access a larger slice of the cake when a
client company is declared insolvent.”

There is no evidence of government or Tory support for this view.

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