Reform of ‘continuity of supply’ rules to benefit UK business rescue climate – R3
Responding to the government’s plans to consult on proposals to require utility companies and other key suppliers to continue to supply insolvent companies (announced today), R3 President Giles Frampton says:
“Contract cancellations and ‘ransom’ charges which take effect on insolvency are one of the biggest obstacles to business rescue that insolvency practitioners come across. They force the closure of potentially viable businesses, posing unnecessary risk to jobs.”
“Our members estimate that banning so-called ‘termination clauses’ in supply contracts could help save over 2,000 businesses a year. R3 campaigned long and hard for action to be taken on termination clauses, winning support from the business and creditor communities. We are very pleased that an end to the use of termination clauses by crucial suppliers is one step closer.”
“Business rescue is in the interests of both creditors and insolvent businesses and their employees. Turning a business around can be a much better outcome than that business being liquidated. Scrapping termination clauses will give many struggling businesses a better chance of survival and should boost the UK’s business rescue culture.”
The proposals will:
- Stop suppliers of IT and other essential services from making increased charges or the payment of debts a condition of supplying their services to an insolvent business.
- Require essential suppliers in the IT and utilities sector to continue to supply goods and services to an insolvency practitioner trying to rescue a business.