European debt recovery tool threatens UK business rescue
A new European Commission measure to freeze the assets of British businesses deals a severe blow to the UK’s rescue culture, warns insolvency trade body R3. The European Account Preservation Order (EAPO) is set to give courts anywhere in the EU the power to freeze funds in UK businesses’ banks accounts without warning. The new measure comes without the protections crucial to similar procedures in English law.
R3 President Frances Coulson comments: “The new measure would drive a coach and horses through attempts to rescue businesses formally or informally. Cash flow is critical during delicate rescue work. Removing access to substantial funds without notice gives a single creditor the right to jeopardise hopes of business preservation, harming creditors as a whole.”
Though intended to help creditors protect assets from concealment or removal by directors, the EAPO’s loose drafting enables the measure to be granted for a range of reasons unrelated to a serious risk to assets. As such, they risk being routinely granted in cross-border debt recovery cases.
Coulson continues: “The UK is seen as an international leader in business rescue, benefitting creditors who usually receive higher returns in rescue than terminal procedures. If EAPOs are supposed to protect assets from dodgy directors, the new regulation should reflect this objective. As they stand, the proposals are dangerous and draconian.”
The UK Government now must decide whether to opt out of the plans, which are moving apace.
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Notes to editors:
- The Ministry of Justice consultation on the European Account Preservation Order can be found http://www.justice.gov.uk/downloads/consultations/eu-cross-border-debt-recovery-consultation.pdf
- R3 is the trade body for Insolvency Professionals, and is made up of 97% of the UK’s Insolvency Practitioners from all over the UK.
- R3 comments on a wide variety of personal and corporate insolvency issues. Please contact the press office, or see www.r3.org.uk for further information.
- R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by one of nine recognised professional bodies.
- R3 stands for ‘Rescue, Recovery, and Renewal’ and is also known as the Association of Business Recovery Professionals.
R3 Press Office