WIREDGOV

The key proposals are:

• To give absolute priority to new money lent to companies in difficulty. This would make it more attractive to lend to businesses in this situation, allowing them to access the funding they need to get back on their feet and stay in business.
• Giving large and medium-sized companies breathing space while they seek legally binding Company Voluntary Agreements (CVAs) with their creditors, without first having to place their companies into administration.
• To introduce new procedures to allow a court-agreed moratorium of up to three months, where the court is satisfied that creditors’ interests are properly safeguarded.

The Insolvency Service will consult on these proposals, which are part of the government’s business rescue measures that were announced in the Budget earlier this year.

Business Minister Pat McFadden said:

“The Government is focused on helping businesses facing the difficulties caused by the global recession. The measures we are proposing will help viable firms get through difficult times and emerge on the other side. 

“When a company becomes insolvent, this can hurt employees, directors, creditors, and suppliers alike. These proposals will look to reduce those knock-on effects.”

Other proposals include:

• To allow Insolvency Practitioners (IP) acting as an administrator, or directors of a company proposing a CVA, to secure new, post-insolvency financing.
• Looking at whether finance costs properly incurred in attempting to rescue a company in administration should rank ahead of other expenses, such as an Insolvency Practitioner’s expenses.
• Looking at whether to limit the effect of an existing floating charge or Asset Based Lending (ABL) agreement to assets acquired or book debts arising before an insolvency event takes place. The aim is to help put viable companies in a better position to secure rescue finance.

The consultation ends on the 7^th September 2009.  Full details of the consultation document can be found at www.insolvency.gov.uk