UK Insolvency news

A radical change to pre-pack administrations has been delayed, the Insolvency Service has confirmed last week.

The highly controversial process involves marketing a business before entering it into administration and selling that business as soon as possible thereafter. A company can also be sold back to the directors or former proprietors, under the proposed changes. 

The government minister responsible for insolvency, Mr Edward Davey MP had previously stated that the changes would come into effect before the end of 2011. However, the Insolvency Service confirmed it will not be implemented until 2012. Sources claim that April 2012 is when changes are likely to take place, as historically it is the preferred month for insolvency updates and revisions. 

A spokesperson for the Insolvency Service is quoted as saying: "Following discussions with stakeholders, amendments are being made to the Statutory Instrument (SI) by our lawyers. The SI will not be coming into force by the end of this year and we are now aiming for next year. The spokesperson also said: "We have endeavoured to take note of representations from all sides of the debate," 

The reforms will see creditors given three (3) days' notice if a company is sold to a related party. Insolvency experts have warned that slowing the rapid turnaround insolvency procedure could result in handicapping a valuable tool and lead to increased company closures.

Frances Coulson, president of insolvency trade body R3, said: "As we said at the time of the government announcement, three days is a long time in business and would increase the likelihood of staff leaving, customers pulling contracts and suppliers withdrawing their goods. The proposed changes could mean unsecured creditors lose out, as more businesses are liquidated instead of pre-packed."

Ms Coulson also said: "This instance highlights the need for government to properly consult on proposals instead of making knee-jerk announcements when their previous pre-pack consultation was inconclusive. In fact the three day notice period wasn’t even one of their proposed options."

Insolvency is very complicated and can be quite distressing. If you need help in handling these matters in a speedy and professional way, contact St Matthew e-Accounting. For more information go to www.stmworldwide.com.uk-bankruptcy or www.stmworldwide.com/company-dissolution