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Insolvency Service launches consultation on proposals for a restructuring moratorium
The Insolvency Service has today launched a twelve week consultation on proposals for a new restructuring moratorium. The proposals would provide company directors with the option of obtaining a protected breathing space in which to negotiate with their creditors and reorganise their business affairs, through a new statutory moratorium.
Launching the consultation, Edward Davey, Minister responsible for the Insolvency Service, said:
“I encourage everyone with an interest in business finance and restructuring to study the proposals for a restructuring moratorium set out in this consultation. This is the time to make your views count.
“Even large and otherwise successful businesses can find themselves facing temporary difficulties, for example when they have inherited very high levels of debt. These proposals are intended to help them act early to resolve problems, safeguarding jobs and promoting sustainable economic growth.”
The option of applying for a restructuring moratorium would be available to companies that are seeking a contractual compromise, or are preparing a statutory compromise proposal – either a Company Voluntary Arrangement or a Scheme of Arrangement. For companies that were failing or were already insolvent, existing insolvency procedures (including administration or liquidation) would continue to apply.
The consultation can be found at http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/RestructuringMoratoriumConsultationDocument.pdf
and invites stakeholders and other interested parties to
review the proposals and respond to The Insolvency Service with
any comments, which will be taken into consideration by the Minister.
Notes to Editors
1 The proposed restructuring moratorium would initially last for three months, allowing a company to negotiate and agree terms of the restructuring or compromise. An extension of this period would be available for more complex negotiations, or even where further time was required for the approval of a statutory compromise proposal.
2 The effect of a moratorium is to temporarily prevent creditors taking action against the company to recover their debts, for example by petitioning for seeking to have the company wound up, by enforcing contractual security rights, or landlords repossessing their premises.
3 In order to help safeguard creditors’ interests, the directors’ application for a moratorium would be sanctioned at a court hearing during which creditors would be able to be represented. An authorised insolvency practitioner would also be involved at certain key stages of the application process, and in helping to safeguard the interests of creditors whilst the moratorium was in force.
4 At present, a moratorium is only available outside of the administration procedure for small companies with a proposal for a company voluntary arrangement (a statutory mechanism for the company achieving a legally binding compromise with its creditors). It is not available to large companies or to companies using other restructuring procedures.
5 Vince Cable and George Osborne launched the ‘Financing a Private Sector Recovery’ on 26 July 2010 to encourage an industry led recovery by addressing the problems businesses face accessing finance. The press notice can be found at http://www.bis.gov.uk/newsroom
6 The consultation can be found at http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/RestructuringMoratoriumConsultationDocument.pdf
and runs from 26 July until 18 October 2010.
7 The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of The Insolvency Service is available from http://www.insolvency.gov.uk
Phone: 020 7674 6910
Phone: 020 7596 6187