Encouraging Company Rescue

The Insolvency Service, which operates under a UK statutory framework, has published a consultation paper on proposals to encourage a company rescue.

The proposals, published on 15th June 2009, look at enhancements to the existing insolvency legislation in the UK to facilitate company rescues in order that:

  • the maximum economic value is rescued from companies that get into financial difficulties, and

  • the impacts of company insolvencies on creditors are minimised,

so that a greater number of jobs are saved and better returns are provided to creditors.

The Insolvency Service states that it would like to see a greater use of Company Voluntary Arrangement (CVA) procedures being made as a mechanism for the restructuring of a company's affairs.

In particular, the proposals consider:

  • extending the option of a moratorium against creditor action to medium and large-sized companies, which is currently only available to small companies using a CVA (who can benefit from a ‘breathing space' during which they are able to seek creditors' agreement to proposals to rescue the company);

  • making available to all companies the introduction of a new court-sanctioned moratorium; and

  • providing greater security to repayment of monies loaned post CVA or administration, to allow firms in difficulties to access the funding they need to recover.

The consultation period will run for 12 weeks and close on 7th September 2009.

For further information about the company rescue services available from JMW's Corporate Recovery and Insolvency Department, please contact the team on 0345 872 6666 or complete our enquiry form on this page.

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