Brett Barton
Brett's recent articles
- Directors Urged To Protect Their Investments
2nd February - Will there be a double dip?
15th September - On Your Marks, Get Set, Go !
17th March
Is This The Beginning Of The End Of Business Rescue?
16th June 2011 13:22
I had hoped that with a change in government the volume of new legislation in the Insolvency Industry would be significantly reduced as the Coalition Government turned their focus to reviving the Country’s fortunes, especially as they had promised to reduce the burden of red tape for small businesses which provide the back bone of the UK economy!
Alas it is not to be. The Insolvency Service is already in a consultation process to introduce a new set of Insolvency Rules by 2013, we recently had a whole raft of changes which came into force in April 2010 and now the Government wishes to address the public misconception that pre-packs are bad by trying to push through some more new legislation.
Over the past few months there has been wide reported criticism that ailing businesses are sold back to the directors at a cheap price. I think this has been wrongly reported and the numbers of businesses that have been rescued by using this process by far outweigh the odd exception when a “pre-pack” may not have been the best option.
The proposed changes to the way “pre-packs” are handled may require a minimum of three days notice to all creditors before a sale is allowed to be conducted. In my opinion this will only serve to dramatically reduce the value of a business as the industry learns of the imminent failure, competitors attempt to undermine the business model and goodwill in the company rapidly erodes. In the most extreme of cases, the damage caused by having to consult with creditors will scare away any interested parties or worst still, there is no meaningful business left to sell!
I believe that the existing “pre-pack” regime can offer many advantages; it offers continuity for the stakeholders, often maximises the value of the assets and most importantly it protects the jobs of the employees as they are re-employed by the purchaser.
If these changes are forced through by the Insolvency Service, we will see many more liquidations and businesses closing down where previously an entrepreneur may have rescued the business by way of a “pre-pack”. Is this the beginning of the end of the business rescue culture?
