New Government plans to introduce reforms to the UK’s corporate insolvency regime have been broadly welcomed by a regional industry expert.
Alexandra Withers, North East vice chair of insolvency and restructuring trade body R3, was speaking after the Department for Business, Energy and Industrial Strategy (BEIS) revealed the initial results of its wide-ranging consultation on insolvency and corporate governance.
The announcement outlined plans to give the Insolvency Service greater powers to investigate directors of dissolved companies when they are suspected of having acted in breach of their legal obligations around pay, pension schemes and other matters.
Measures which will ensure greater accountability of directors in group companies when selling subsidiaries in distress, and which will enhance existing recovery powers of insolvency practitioners in relation to value extraction schemes are also being proposed.
Actions designed to enhance corporate governance structures and improve business transparency are also included in the government’s proposals, further details of which will be released in the autumn.
Alexandra Withers, who is an Associate Solicitor in the Insolvency department of Short Richardson & Forth Solicitors, says: “R3 has been working with the Government on how the UK’s world class insolvency and restructuring framework for dealing with distressed businesses should be evolving to ensure it remains flexible, responsive and fully fit for purpose, and we’re pleased to see progress now being made.
“We have long campaigned for businesses in distress to have access to a business rescue moratorium – that is, a period of supervised ‘breathing space’ from creditors, to allow for plans to be put in place to deal with their debts and to try to help them avoid insolvency.
“This moratorium must strike a balance between the needs of the distressed business and its creditors to ensure that these creditors feel comfortable with continuing to supply and extend credit, and the government’s new restructuring tool should go some way in helping to rescue viable businesses and save jobs.”
R3’s highly-qualified members are drawn from many of the best-known firms in the North East’s professional services community and work to find the best ways forward for financially-troubled businesses and individuals, as well as for their creditors.
Alexandra Withers continues: “Our members have raised concerns for a long time that some directors are deliberately dissolving businesses to avoid paying their debts, so the government’s announcement that it will look to disqualify or fine such individuals is an important part of ensuring directors are less likely to walk away from their responsibilities.
“We would urge the government to consider how it can work more closely with the insolvency and restructuring profession to investigate the conduct of directors of dissolved companies and so hold them accountable for their actions.
“Greater coordination between different parts of the government, such as HMRC and the Insolvency Service, and our experienced practitioners would help to identify patterns of misconduct in a more timely fashion, which would prevent further losses to creditors, suppliers, employees and the public purse.
“In improving corporate governance standards and tackling rogue directors, a balance must be struck between ensuring that directors are held to account, and giving distressed businesses the chance to secure the best chance of a sustainable long-term future.
“We are looking forward to working with the government to move these proposals forward. once we have seen the full detail, and to helping to strengthen the framework which underpins corporate insolvency and restructuring in the UK.”