The Government have recently announced reforms to insolvency and corporate governance. The reforms are set to be the biggest changes to the insolvency and restructuring legislation since 2002.
What are the changes?
A new moratorium will be introduced. This will give companies a period of time during which creditors will be unable to take any action against the company giving the company time to arrange restructure or seek investment. Suppliers of contracts or goods will be prohibited from pursuing debts as the company has sought to enter into an insolvency or restructuring procedure.
The Government are also proposing the introduction of a new insolvency procedure which will bind all creditors even those who wish to vote against it.
Directors are to be held more accountable for their own actions.
Insolvency practitioners to be given more powers in relation to value extraction schemes.
The Insolvency Service to be given more powers to investigate when it suspects that directors of dissolved companies have acted in breach of their duties.
The Government proposals are currently under consultation and it will be really interesting to see what new legislation emerges. The corporate governance reforms have been drafted largely in response to cases like BHS. If the reforms are implemented then it will make the former owners of BHS (Philip Green) more accountable for their actions.
It will also be interesting to see whether the new moratorium gives struggling business much needed breathing space from certain creditor groups such as HMRC and banks who can adopt an aggressive approach when a business enters into difficulty.