Ban on ‘essential supply’ changes in business insolvency

Published on February 12, 2015 by Crawfords Accounting

Government proposals to safeguard essential supplies like IT services and utilities for companies in business insolvency have been welcomed by R3.

The plans are due to become law in October 2015, and would mean suppliers could not cut off insolvent customers, or charge penalty fees, and would need to apply to the court for permission to cancel the supply due to hardship.

Ultimately the idea is to help keep conditions as ‘normal’ as possible during business insolvency, in an attempt to give companies the best possible chance of being rescued, either by a buyer or by improving trading conditions and restructuring.

Giles Frampton, president of the insolvency trade body R3, called the proposals “great news for UK plc” and a chance to cement the UK’s world-leading position in the insolvency profession.

“Changes to the terms of supply for insolvent businesses place unnecessary hurdles in the way of business rescue,” he said.

“Without reliable and affordable IT and energy supply, attempts to save a business can be stymied quickly.”

He added that even more suppliers should be subject to such sanctions, so that when a company enters insolvency, it is not possible for their most essential of suppliers to “steal a march on other creditors”.

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