THE NEXT government must commit to a series of reforms of the UK’s insolvency regime, trade body R3 has said.
R3 has called for reforms to legal funding for insolvency cases, returning money from rogue directors to creditors, the treatment of small business creditors in football insolvencies, the government’s approach to being a creditor in insolvencies and a comprehensive update of the personal insolvency regime.
Every year, £160m is returned to creditors (mainly small businesses and HMRC) as a result of legal action against directors of insolvent companies who have wrongly, negligently, or fraudulently taken creditors’ money.
This is only possible because of an exemption for insolvency litigation funding from the The Legal Aid, Sentencing and Punishment of Offenders (LASPO) Act, which expires in April 2015.
“This exemption must be made permanent or millions of pounds will stay in rogue directors’ hands every year,” R3 said.
The personal insolvency regime has not been reformed as a whole since 1986, so a comprehensive review is needed, the trade body said. It suggested that simple steps, like updating the entry requirements for bankruptcy and Debt Relief Orders, could be taken.
“Insolvency is about striking the right balance between creditors’ and debtors’ needs. Sometimes, existing legislation and regulation can make this balance difficult to achieve,” said R3 chief executive Graham Rumney.
“These reforms are about getting small businesses, taxpayers, and indebted individuals a better deal from insolvency.”
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