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Government must back down on insolvency changes, say business groups

Leading business groups, including the Federation of Small Businesses, the British Property Federation, ICAEW, and insolvency trade body R3, are calling on the Government to accept an Opposition amendment in the Small Business Bill ahead of a parliamentary vote on Wednesday 19th November*.

At the Bill’s committee stage two weeks ago, an Opposition amendment undid Government plans to restrict physical creditors’ meetings in insolvencies – Government MPs missed the vote. The Government is expected to try and reverse the amendment at the Bill’s report stage.

The business groups are concerned that restricting physical creditors’ meetings will lock smaller creditors out of the insolvency process, make it harder to uncover bad behaviour by insolvent companies’ directors, and have a negative impact on the money creditors receive back in insolvencies.

The Government’s intention is to ban physical creditors’ meetings unless they are requested by 10% of creditors – potentially hundreds of businesses or individuals. The Opposition amendment requires just one creditor to request a meeting. Meetings are currently held at insolvency practitioners’ discretion.

Giles Frampton, president of R3, says: “Creditor engagement is a crucial part of the insolvency processes. It means transparency for creditors, while insolvency practitioners benefit from creditors’ insight.”

“The Bill is supposed to boost creditor engagement, which makes restricting physical creditors’ meetings illogical. Not all small businesses have the broadband access necessary to take part in online meetings, while correspondence with creditors will only tell an insolvency practitioner so much. Face-to-face meetings are hugely valuable.”

“Ideally, physical creditor meetings should be held at an insolvency practitioner’s discretion, but the Labour amendment is an acceptable compromise. 10% of creditors could require an insolvency practitioner to contact hundreds of different business and individuals to do something they once could have done at the drop of a hat.”

“The Opposition amendment gives the Government the chance to think again about this misguided proposal.”

ICAEW Director, Professional Standards, Bob Pinder, says:

“The proposed measures to remove discretion to hold meetings is micro-managing the insolvency process. Insolvency practitioners use their professional judgement every day, often dealing with assets worth many millions of pounds. They should be able to choose the most appropriate mechanism to engage with creditors.”

“The insolvency profession is a highly regulated profession and proposals for change should be evidence-based. If not, they serve to undermine the confidence of users and practitioners.”

*Debate begins on 18th November, but relevant amendment likely to be discussed on the 19th.

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.