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Friday, 13 November 2009

Governments reponse to consultation on insolvency issues

Thanks to "They Work For You" for this extract

"The Minister for Business and Regulatory Reform has today made the following Statement.

I am setting out today the Government's response to the recent Insolvency Service consultation on encouraging company rescue.

In launching the consultation, the Government identified the importance of maintaining an effective and fair corporate insolvency framework that enables viable businesses facing temporary difficulties to turn themselves round, helping to preserve jobs and livelihoods. The consultation document invited views on a number of possible measures to further enhance the existing regime, including moratoria for companies that need a breathing space in order to agree restructuring proposals with their creditors, and measures to promote increased access to rescue finance.

More than 50 businesses, individuals, and representative bodies responded to the consultation. The majority of respondents supported the Government's view that despite the challenges faced by business in the current difficult economic conditions, the existing statutory framework for company rescue is performing well, and continues to compare well internationally.

The moratoria proposals were broadly welcomed. Respondents made a number of helpful comments and suggestions as to how the potential benefits could be maximised, whilst minimising the risks to creditors. The Insolvency Service will be taking forward more detailed development of the relevant proposals over the coming months, building on feedback received from the consultation.

In relation to rescue finance, the views of respondents were more divided. A number suggested that in practice the availability of new finance for companies seeking to restructure was less of an issue than had been indicated, and that the need for legislative change was not apparent. Stakeholders also recognised the need to balance the benefits of possible legislative changes against some of the risks, particularly if changes had a negative impact on the behaviour of lending institutions towards businesses in general. Having considered the consultation responses on this issue, the Government have decided that they will not for the moment be taking forward the finance-related proposals. We will however continue to work with stakeholders to monitor the position going forward.

Copies of the non-confidential responses to the consultation are being published today on the Insolvency Service website (, together with a summary of those responses".

So the proposals for so called super secured funding post insolvency such as administration looks like its on the back burner at best. CVA moratoria may be taken further for larger companies and possibly made less onerous for insolvency practitioners (IP's). Plus the consultation asked for comments on the creation of a new, court-sanctioned moratorium of up to three months, this would be intended to allow companies a period of protection during which they could prepare CVA proposals.

KSA would welcome this if the onerous nature of the moratorium for the nominee was diluted.

The good news is that a healthy response to the consultation has led to a good debate on the use of CVA's

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