Insolvency Practitioners and Financially Distressed Companies
Our Insolvency Practitioners Report on a Plan for New Tools to Improve Rescue Opportunities for Companies in Financial Difficulty
The Government has recently published plans for new tools to improve rescue opportunities for financially-distressed companies. Following a consultation in 2016, most respondents were in favour of the Government’s proposals of new rescue measures aimed at strengthening the insolvency regime and to also strengthen corporate governance. The insolvency practitioners from our London office report on the plans.
The Main Elements of the Plan
These measures have been declared alongside new reforms, with the main intention being to tackle irresponsible directors and improve corporate governance to look after creditors, employees and other stakeholders in companies which are facing insolvency. They also include a period of ‘breathing space’ – a moratorium – allowing viable companies more time to restructure or seek new investment to rescue their business from prospective action. Such companies will be supported through a rescue process by the introduction of new rules that prevents suppliers terminating contracts solely by virtue of a company entering an insolvency process.
A new restructuring procedure will provide an alternative option for financially-distressed companies to restructure their debts.
Measures to Improve Corporate Governance
New measures are also being announced to improve corporate governance so that creditors, employees and other stakeholders are treated fairly by the directors of failing companies. This follows concerns about some recent high-profile corporate failures. These new measures include:
- New powers for the Insolvency Service to investigate directors of dissolved companies,
- Enhancements to existing antecedent recovery powers, and
- The ability to disqualify directors of holding companies who unreasonably sell insolvent subsidiaries.
How Can Insolvency Practitioners Help?
We’re Licensed Insolvency Practitioners, but we’re also business recovery specialists. So, when businesses are financially distressed, our aim is to help them survive financial difficulties and avoid, if possible, having to implement a formal insolvency procedure. We are, therefore, keen to see how these plans pan out, as and when they are implemented.
Most of our work is with owner-managers of SMEs, who have contacted us when they are at a distress or crisis point in their business cycle. It is always the case that the sooner financial difficulties are recognised, and the right assistance is sought, the greater the chance of turning things around.
Need Help with Insolvency, Recovery or Turnaround?
If you or your business is facing insolvency, the sooner you contact us, the more we can help.