Back in July 2014, Business Minister, Jo Swinson, presented proposals to help struggling businesses during the insolvency period, by ensuring energy companies continued their services. This would primarily stop businesses from being shut down while rescue or turnaround solutions could be prepared.
It has now been announced the government is going to proceed with these plans and they have been put forward to parliament. Essential suppliers, like IT, electricity and water, will not be able to cut off supply or charge higher prices while a company is insolvent. This will give the Insolvency Practitioners time prepare a turnaround solution like a Company Voluntary Arrangement (CVA).
While this could temporarily leave the supplier out of pocket, safeguards would be put in place to ensure they get paid. Energy companies will be able to contact the Insolvency Practitioner anytime to arrange a Personal Guarantee, which makes directors of the insolvent company personally liable if the company cannot pay back the debt to the supplier. The supplier will also be able to apply to Court to terminate their contract if there is a valid reason they can’t continue to supply.
Jo Swinson said, “These changes will help struggling businesses during rescue while providing confidence for the suppliers that they will be paid for the essential services they provide.”
“I would like to thank those sectors who have worked with us to get the balance of these reforms right. By providing greater protections for insolvent companies during rescue, more businesses should be saved.”
The changes will come into effect from the 1st October 2015.