Business minister Jenny Willott has today (23 Januray) announced a series of measures designed to reduce the cost of insolvency procedures.
As part of the government’s response to the Red Tape Challenge launched in July 2013, the measures are aimed at reducing the cost of insolvency and benefit creditors by £30 million a year.
Willott said: “When businesses do enter the stage of insolvency we need to make sure that the process is as smooth and straightforward as possible.
“One way of doing this is cutting burdensome red tape which makes insolvency proceedings less complicated and troublesome.”
The measures proposed include: allowing IPs to communicate with creditors electronically, instead of by letters removing the requirements for office holders to obtain court orders for certain actions (e.g. extending administrations, posting information on websites); reducing record keeping requirements by IPs which are only used for internal purposes; allowing office-holders to rely on the insolvent’s records when paying small claims, reducing the need for creditors to complete claim forms; and reducing costs by removing the requirement to pay out small dividends and instead using the money for the wider benefit of creditors.
Willott said: “If we’re to help build a stronger and more sustainable economy then we need to make sure that businesses have the right environment to grow.
“At the same time, when companies do fail, we need to make sure creditors get a fairer deal. The measures published today will help us achieve that.”
Vice-president of the insolvency trade body R3, Giles Frampton, has welcomed the new proposals.
Frampton said: “They are simple, common sense steps that remove several unnecessary hurdles for IPs and businesses to contend with.”
“We are very pleased to see that so many of our own proposals, in particular, those that help boost the rescue culture, have made it into the Government’s plans. The proposals will allow IPs to spend more time rescuing businesses instead of form processing”
“We are still awaiting the full detail of how the Government is proposing to make their changes, but what we have heard so far is a good start.”