The Insolvency Service has produced a consultation paper on the UK corporate insolvency framework and has proposed certain reforms.
The consultation opened on 25 May 2016 and closes for responses on 6 July 2016.
The key proposed reforms are:
- Introducing a new moratorium for distressed businesses to provide breathing space to consider rescue options, free from enforcement by creditors. The moratorium proposed is for three months initially, with the prospect of extension. Certain conditions would need to be satisfied and it is proposed that the situation would be supervised by an authorised insolvency practitioner.
- Developing a flexible restructuring plan and bringing in a mechanism whereby stakeholders who have no financial interest in the company, in the event of its liquidation, are bound by the restructuring plan and have no say in the restructuring process.
- Helping a businesses continue to trade through the restructuring process, by letting key suppliers continue to supply the business, throughout any moratorium or administration, on the same terms and free from any termination clauses. This is with a view to stopping suppliers taking advantage of the restructuring process by way of ransom payments or by renegotiating contract terms; and
- Developing the market surrounding rescue finance.
The Government aims to publish its response to the consultation and the results of all external responses received within three months of the close of the consultation.
Further details on the consultation are available on the Insolvency Service website.