Newsroom

Cautious move on insolvency welcomed

The government's decision to drop the changes it planned to make to the insolvency system has been welcomed by the British Property Federation.

The planned legislative amendment to the current insolvency system would have had a detrimental affect on landlords.

In a ministerial statement released yesterday, the government stated it no longer intended to introduce ‘debtor-in-possession finance’ facilities into the UK insolvency system. It had also decided not to introduce legislation to extend the moratorium as part of CVAs to large businesses.

The BPF was concerned that the government was planning to change the insolvency legislation without considering all the impacts on creditors.

Ian Fletcher, BPF director of real estate policy, said: “The government has been wise in deciding against its inclination to make changes. Amending the current insolvency system in the middle of a recession would have been detrimental to all creditors. The cautious approach being taken by the Insolvency Service is the right one.

“The decision to discuss the moratorium proposals with expert groups is a sensible approach, and we hope that landlords will be given the opportunity to put forward their views."

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113 / ateacher@bpf.org.uk.

Notes to editors

The Insolvency Service published its response to the feedback it received on its ‘Encouraging Company Rescue’ consultation on 11 November 2009. Click here for the original consultation document.

The Encouraging Company Rescue consultation proposed to introduce facilities to make it easier for companies to borrow money whilst in administration, much akin to the Chapter 11 system that exists in the United States. The consultation also proposed to introduce an extended moratorium for large companies.

Currently only small companies can benefit from an automatic moratorium as part of a CVA, and the consultation proposed to extend this automatic right to large and medium sized companies.
The Court Sanctioned Moratorium proposals would have allowed directors of a company to apply to the court for an initial private hearing at which the court could grant a moratorium of protection of the business of 42 days. The court application for the initial private hearing would have to have been supported by a statement from an insolvency practitioner (IP) that, in the IP’s professional view, a certain number of tests were satisfied.

The Insolvency Service ruled against the finance related proposals, as it felt there was insufficient support from stakeholders for them.