Business Minister, Jo Swinson, is putting forward proposals to help struggling companies during the insolvency process. The plans would look to utility companies to continue providing their essential services while the business tries to recover (but is still classed as insolvent). The aim is to stop increased charges and avoid further damage to a vulnerable company while turnaround firms and insolvency practitioners assist with restructures. It’s also hoped that jobs can be saved in the process.
Swinson commented, “Businesses are currently closing down because insolvency practitioners are unable to secure the essential supplies they need to continue trading whilst they restructure or seek a buyer. This measure will ensure they can secure the supplies they need to deliver the best outcome for creditors and employees”. This move would be a great help to distressed companies as it would relieve some of the pressure. President, Giles Frampton, of R3, said “banning termination clauses in supply contracts could help save over 2,000 businesses a year.”
Helping a business to restructure and continue trading is always a far better outcome than liquidation and these proposals are definitely a step in the right direction. It puts the emphasis on turnaround as businesses now have a lifeline to keep them going through the insolvency procedure. Without those essential utility services, there is a much greater risk of business closure.
Update: 01 Oct 2015 – Plans have been put into action ensuring essential utility companies (now including communication and technology) continue to provide services while the company is administration. The ruling confirms these essential service providers can ask for a personal guarantee from the insolvency practitioner to make sure they are not out of pocket.