REUTERS | Neil Hall

Consultation on business rescue procedures

With the country in the midst of the worse economic decline for decades, insolvency is often in the headlines. The construction industry has seen more than its fair share of insolvencies, with a number of high profile companies falling victim to the recession. We have seen some big names disappear (David McLean, Mann Construction, Pettifer Construction to name but a few). Most recently, Ashford Construction and William Verry both went into administration. Experts predict that, as with the recession in the 1990s, things will get worse before they get better, as the country comes out of recession.

To try and counter this, to get UK businesses through the recession and out the other side, stronger and more successful, the Government announced (in the April 2009 budget) that there would be a consultation on business rescue procedures. Its paper, “Encouraging Company Rescue” was published last month. The consultation closes on 7 September 2009.

There are two main themes to the proposals:

  • Promoting the use of company voluntary arrangements (CVA), to give companies the protection of a moratorium against creditor action while they formulate CVA proposals.
  • Facilitating loans to companies in administration or CVA to assist their rescue, by giving the repayment of such loans priority over existing creditors.

PLC Restructuring and Insolvency has launched a forum where leading practitioners can share their views on the current proposals. If you would like join in, click here.

In the meantime, there are some signs of hope. Activity in the house building sector is starting to increase and sales are on the rise; even though rumours have started suggesting it is a potential target for Government cuts, work on Crossrail has started; and construction at the Olympic site is progressing ahead of target.

2 thoughts on “Consultation on business rescue procedures

  1. On 11 November 2009, the government published its response to the consultation, Encouraging Company Rescue. The upshot of the consultation is that the Insolvency Service is to prepare more detailed proposals on giving struggling companies the ability to benefit from a moratorium on creditor action whilst preparing restructuring proposals.

  2. On 12 November 2009, the Office of Fair Trading (OFT) announced that it has launched a market study into corporate insolvency.

    The OFT will examine the structure of the market, the appointment process for insolvency practitioners and any features in the market that could result in harm, including the level of professional fees and the rates of recovery achieved for creditors.

    The OFT hopes to complete the initial phase of the study by summer 2010.

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