Business minister Jo Swinson has today (8 June) announced a series of proposals to offer insolvency businesses support from the IT and utilities sector.
In a consultation launched today, Swinson confirmed measures aimed at halting increased charges and payments of debts forced upon insolvent businesses as a condition of continuing supply by utilities and IT providers.
Suppliers of essential utilities will now have to continue providing their services during the business recovery. Safeguards have also been introduced to ensure suppliers are “adequately protected”.
Swinson said: “These proposals are good news for employees of insolvent businesses, creditors and insolvency practitioners who are trying to rescue ailing companies.
“Businesses are currently closing down because insolvency practitioners are unable to secure the essential supplies they need to continue trading whilst they restructure or seek a buyer. This measure will ensure they can secure the supplies they need to deliver the best outcome for creditors and employees.
“The measure also demonstrates the Government’s commitment to doing all we can to save jobs and build a stronger economy. I look forward to hearing the views of all interested parties to ensure that the right balance is struck when implementing these changes.”
President of insolvency trade body R3, Giles Frampton, believes the proposals will remove some of the biggest obstacles to business rescue.
Frampton commented: “Termination clauses which take effect on insolvency are one of the biggest obstacles insolvency practitioners come across. They force the closure of potentially viable businesses, posing unnecessary risk to jobs.
“Our members estimate that banning termination clauses in supply contracts could help save over 2,000 businesses a year. R3 campaigned long and hard for action to be taken on termination clauses, winning support from the business and creditor communities.
“Business rescue is in the interests of both creditors and insolvent businesses and their employees. Turning a business around can be a much better outcome than that business being liquidated. Scrapping termination clauses will give many struggling businesses a better chance of survival and should boost the UK’s business rescue culture.”