Insolvency Process Shake-Up

Proposals to shake up the insolvency process have been voiced by the Business Secretary, Vince Cable. He wants tocome down harder on those ultimately responsible for a company that has to go into insolvency, and the proposals include;

  • A register to identify a company’s ultimate owner
  • Directors who have been banned from outside the UK will be banned from running a UK company
  • Allowing courts to hand out fines to directors when handing down a disqualification order

Furthermore, when giving out a disqualification order, Mr Cable would also like courts to take into account previous company failures, and adjust sentences to reflect past financial history.

Mr Cable is also seeking to provide the Financial Conduct Authority with disqualification powers, making it another authority able to disqualify directors in addition to the Insolvency Service. Moreover, Mr Cable wants the current time limit of 2 years available to bring disqualification proceedings against the directors to extend to 5 years, ensuring that no one can slip through the net to set up another company and repeat their mistakes.

The reforms have been brought on by the launch of the Transparency and Trust discussion paper put forward by the Department of Business, Innovation and Skills (BIS). As part of this paper, a review has also been launched into pre-pack administrations, or phoenixing as it is sometimes known. Pre-packs are when the directors and/or shareholders of a company that has gone into insolvency proceedings buy back the assets of the dying company and reform it under a new name – in other words, rising from the ashes.

The insolvency process has come under review in order to establish whether it encourages growth, employment and provide value to creditors…or whether it is simply a means to an end.

If you would like to know more about the insolvency process, and the different options available when going into insolvency proceedings, please contact Michael Goldstein on 01923 224411, or email him at michael.goldstein@myersclark.co.uk.