Land Rover sets 'dangerous' insolvency precedent
Land Rover's suggested shakeup of the insolvency laws could set a dangerous precedent for UK business practice.
Today, the car manufacturer said it would submit proposals to the government on a new style of insolvency, which would be more like US Chapter 11 bankruptcy laws. Under Chapter 11, companies are protected from creditors while they restructure their business.
Phillip Sykes, head of Business Recovery at Moore Stephens said a dangerous precedent would be set if Land Rover’s proposals were aimed at stopping receivers from using their commercial leverage with sole suppliers.
He said: ‘If you do go down some sort of draconian prescriptive legislation route like that, you run the risk of the receiver saying that nothing more can be done and [shutting down the company.]
‘If they are suggesting that companies shouldn’t be allowed to use sole supplier status as commercial leverage then that would make the situation unworkeable.’
Two weeks ago Accountancy Age reported insolvency practitioners as saying calls for an insolvency shakeup were a futile exercise. They said Chapter 11 would make little difference to the commercial reality of company insolvencies.