Posted 11 July 2016 By Steve Elliott, Business Recovery and Insolvency Partner
In Business Recovery & Insolvency
Much has already been written about the broader effects of Brexit and I think that I can safely deal with the impact on general insolvency in the UK by saying that there will be little immediate discernible change in the way we IPs do business as a result of the leave vote.
However, one early consequence of the diversion of Government attention may be a delay in a decision on the proposed new statutory moratorium for insolvent companies, which is currently under a (very short) consultation period.
The introduction of the Administration procedure in 2002 went some way towards the USA style Chapter 11 rescue process but didn’t address some key issues which are now proposed:
- “Cram down” provisions will be introduced to bind dissenting creditor groups.
- Rescue finance will be enabled.
- A 3 month (at least) “debtor in possession” period will be available without application to Court and those directors retaining control, will be free from risk of personal liability (provided they comply with the terms of the moratorium).
- The definition of “essential supplies” will be widened (to give two examples from this week, if you operate a beauty parlour, nail varnish would be an essential supply or a pet-food supplier, dog biscuits!). Essential suppliers can be forced to deal with a company, notwithstanding that they have an existing debt (although provisions on future debt will help protect them from further loss).
There is no proposed “de minimis” on the availability of the new moratorium and it will be interesting to see how it works in practice, if and when it gets out of the parliamentary “long grass”.