Insolvency, Bankruptcy : A WAY BEYOND?
Main Page : INTRODUCTION
Extract 1 : THE RESCUE CULTURE
Extract 2 : THE ENGLISH RESCUE CULTURE
Extract 3 : RESCUE CULTURE - CAN WE LEARN FROM OTHER JURISDICTIONS?
Extract 4 : A WAY BEYOND?
A WAY BEYOND?
In a short answer yes. As can be seen from the preceding discussion, there have made large steps but there still remains paces ahead.
It is submitted that the US system can be seen to offer something of a greater flexibility over the UK approach, and should be followed to some extent. There are two provisions that may prove useful in UK, one is to alter the position to one that is like in the US where the company can be kept in the hands of the current managers yet under close supervision of the court, and the other is a change to ensure that as in as there is no need to always liquidate the company even if it is worth more to the creditors as liquidated then to be kept running as a going concern.
As regards to the much needed moratorium the restrictions on companies are still, it is submitted, overtly restrictive. A company is not eligible if it is in liquidation (including provisional liquidation), receivership or administration or if a voluntary arrangement is already in place. Nor is it eligible if at any time during the period of 12 months ending with the date of filing and either a voluntary arrangement was put in place at the time or any voluntary arrangement put in place during the moratorium came to an end prematurely.
Effectively, as Rennie points out "the directors get one shot at the title."1 Indeed the very purpose is that the moratorium gives them time and leeway to put the CVA into action and, if they cannot do this during the period of the moratorium, they are unlikely to get another chance. In addtion, the provisions only apply for what are, on the grand scheme of things, very small companies, and there seems to be no good reason why if the provision apply to smaller companies that they shouldn't apply to larger companies.
The provisions have made significant steps forward with the deferring of the Crown's preferential rights to recover unpaid taxes ahead of other creditors, which will undoubtedly lead to companies being given a further lifeline. In addtion, the veto power of floating charge holders has been retracted, and under the 2002 Act a proportion of the funds which would otherwise be available to the floating charge holders are to be allocated for distribution to unsecured creditors through "ring-fencing" in a way that further resembles the viewpoint of the left of rescue culture philosophy, aimed at a purposive rights shifting again been followed. 2
And, it is submitted long may such continue.
- See http://www.legal500.com/devs/scotland/in/scin_002.htm[^ Return]
- http://www.mazars.co.uk/resources/publications/cris_news/crisnews_11_02.pdf[^ Return]
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