Have your say: measures to help companies in distress

By: Fanny Marshall

Date: 26 June 2009

Businesses will welcome the opportunity to give their views on amending the insolvency rules to help businesses facing financial difficulties.

The Insolvency Service is consulting on proposed measures that will help viable firms survive in difficult times. When a company becomes insolvent, it can affect employees, directors, creditors, and suppliers alike, and these proposals are seeking to reduce those knock-on effects. The main proposals are:

  • to give absolute priority to lenders seeking to recover new money they have lent to companies in difficulty – this would make it more attractive to lend to businesses in this situation, allowing them to access the funding they need to get back on their feet and stay in business;
  • to give large and medium-sized companies breathing space while they seek legally binding Company Voluntary Agreements (CVAs) with their creditors, without first having to place their companies into administration; and
  • to introduce new procedures to allow a court-agreed moratorium of up to three months, during which a business is protected from action by creditors, where the court is satisfied that creditors’ interests are properly safeguarded.

The Insolvency Service is particularly keen to hear the views of small businesses, who are likely to benefit most from the proposal that rescue finance should rank in front of other administration expenses. Also, while the proposals may have a direct effect on larger companies, the indirect effect of the measures may be felt by smaller businesses as suppliers and creditors of those companies. Businesses have until 7 September 2009 to respond to the consultation.

What does the * mean?

If a link has a * this means it is an affiliate link. To find out more, see our FAQs.