Tag Archives: insolvency

A Case for British Chapter 11

It takes many years to develop a business and for it to grow. Enterprises employ millions of people who support their families and are the building blocks of our national wealth. Should we not be more supportive, as a society, when a company fails?

Since 2000, the number of businesses in the UK has increased each year, by 3% on average. In 2016, there were 2.2 million more businesses than in 2000, an increase of 64% over the whole period. Businesses actual employment of people has fallen since 2000 from around a third, to a quarter. This decline is due to the growth in self-employment. The total number of company’s insolvencies from 2013 to 2016 was just over 70,000 (Office of National Statistics).

In most countries, there are two tests for bankruptcy:

  • A company that cannot pay its debts because there is not enough money in the bank (this would tip a company in the UK into liquidation);
  • A company with liabilities that exceed its assets (the company can avoid liquidation if it can negotiate a deal with its creditors).

The UK’s insolvency system, on the whole, returns more money to creditors (as it’s more creditor centric) and is faster and cheaper than the United States, for example. However, a common complaint among struggling firms under the threat of insolvency is that the time for decision-making is too short. Critics believe firms need a longer period to consider their options and take decisions without jeopardising the company’s supply chain and increasing pressure on their cash flow, both of which will accelerate the commencement of insolvency. Therefore, there is a desire to ask the government to copy the Chapter 11 system in the United States, where companies are allowed 90 days’ grace.

Posted in Op-eds | Also tagged , and | 6 Comments

The Independent View: Ministry of Justice costs reforms undermine Vince Cable’s aim of tackling rogue directors

Statue of Justice - The Old BaileyA key message the Business Secretary Vince Cable has been keen to stress during his time in government is the need to tackle rogue directors: he’s announced plans to produce “stronger deterrents” and “more robust sanctions” to quash ‘dodgy directors’. Dr Cable’s – and insolvency minister Jo Swinson’s – policies on protecting creditors from rogue directors are certainly worth developing, but they are at risk of being undermined by policies being put forward by the Ministry of Justice.

The Ministry of Justice has been seeking to tackle the costs of litigation, but its reforms will end up having a big impact on the insolvency profession’s ability to combat rogue directors and will have disastrous and costly consequences for small business creditors and the taxpayer.

Posted in Op-eds and The Independent View | Also tagged and | 1 Comment
Advert



Recent Comments

  • User AvatarMary Reid 5th Jun - 11:26am
    Love that one, @Ian Sanderson
  • User AvatarJohn McHugo 5th Jun - 11:17am
    I agree with Steve Richards and Joe Bourke. Politics is the art of the possible, and how to do the greatest good in the particular...
  • User AvatarRoland 5th Jun - 11:05am
    From what is being implemented locally, don't see much real difference, other than the media headline. My teenagers go back to school as from 15-Jun....
  • User AvatarRussell Simpson 5th Jun - 11:03am
    Sean Hagan I think the post from Joe Burke is really important. Since I moved here from NZ in 1986 I think the Coalition govt...
  • User AvatarAlison C 5th Jun - 10:54am
    Do please keep on with your isolation diary. It is the only posting I always read right through, reminding us of our many blessings. But...
  • User AvatarDavid Raw 5th Jun - 10:52am
    I do so hope Tom's assumption is correct. My memory of American Presidents goes way back to Harry.S. Truman and given that we've had eleven...