Member News
4th March 2011
Insolvency legislation needs to be brought into the 21st century to ensure suppliers cannot hold companies facing insolvency to ransom.
This is the premise of a new campaign launched by the insolvency trade body R3 and the subject of a parliamentary roundtable on Tuesday afternoon attended by several MPs, including Lorely Burt, Gordon Banks and John Glen.
Insolvency practitioners are often hampered in their plans to rescue a company when a supplier withdraws supply or demands an unaffordable ransom payment in order to continue supply.
Under current legislation it is only utility companies that are required by law to continue to supply a company facing insolvency, providing bills are paid in full and on time. Steven Law, president of R3, believes this is a reflection of the fact that the legislation was drafted 25 years ago.
"The corporate world was very different 25 years ago, nowadays companies are not just reliant on utilities but computers, websites, mobile phones," he said.
R3 would like to see legislation enacted which would treat IT and computer suppliers in the same ways as utility suppliers. Ultimately they would like legislation to ensure all suppliers dealing with companies entering formal insolvency are bound to their existing contractual terms.
Industry professionals present at the event were in agreement that if something is going to be done, it needs to be done now, due to the increasingly difficult environment in which businesses are trading.
The MPs present expressed cross-party support for the measures, however as Gordon Banks pointed out, this does not necessarily mean the government is going to "run and legislate".
A further pointer to government policy was offered by Nick Howard, director of policy at the Insolvency Service, who told the room that the government is not "looking to regulate".
He advised his audience to make sure that the figures really underpin the campaign, as before it legislates the government would want to see "a strong money-based case".
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