Insolvency plan sparks lending fears
Insolvency practitioners have said the knock-on effects of the government's proposals to restrict or abolish administrative receivership, unveiled this week, could be disastrous.
The proposal, unveiled as part of the government’s ‘Enterprise for All’ package, was designed to put creditors on a level playing-field, and end control enjoyed by banks who appoint the receivers.
But insolvency practitioners say the proposals will not encourage enterprise, as the government hopes. Phillip Sykes, senior corporate recovery partner at Moore Stephens, said: ‘I think getting rid of administrative receivership is a mistake. It has a good record. It rescues a viable business from an insolvent corporate shell and it’s a very efficient effective process.’
John Alexander, national head of corporate recovery at PKF, said receivership is a good thing because it is quick, cheap, flexible and enables businesses to be saved an orderly manner.
Insolvency practitioners across the board warned the changes could make banks less willing to lend businesses money.
Simon Freakley, of Kroll Buchler Philips, said: ‘Bizarrely if [the chancellor] is trying to promote an enterprise culture, the steps he has taken to remove banks’ ability to appoint administrative receivers may be one that restricts it.’
Freakley said this could have a knock-on effect even on healthy companies. ‘The devil is in the detail,’ according to Roger Oldfield, president of R3, the association of business recovery professionals.
‘Unless the government changes the rules on bank security or if they go further and tinker with banks’ security rights, the results could be disastrous.’
Practitioners said Brown was attempting to deal with an old problem and the mistaken belief banks acted in their own interest.