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25/05/2016

Government business rescue moratorium proposal welcome

Commenting on the government’s announcement this morning that it is proposing a 3 month moratorium from creditor action for insolvent or near-insolvent companies (details here), Andrew Tate, president of R3, the insolvency trade body, says:

“R3 welcomes the government’s proposal to introduce a moratorium for struggling businesses to give them breathing space from creditor pressure. A moratorium could give company directors more time to turn a business around and negotiate with their creditors.”

“R3 has already published its own proposal for a business rescue moratorium and is pleased to see the government is following suit.”

“It’s very important that any moratorium is practical. It should be short, to make it easier to fund and to limit the burden on creditors, and there should be a licensed insolvency practitioner in place to look after creditors’ interests.”

“The government must also avoid repeating the mistakes of existing moratorium options and ensure the oversight role is proportionate.”

“R3’s own recommendation is for a 21 day long moratorium, extendable to 42 days with court approval and insolvency practitioner oversight. This should be long enough for a company to put in place a rescue plan and for it to bring creditors on board with what it is trying to do. A longer moratorium increases the risk of harm to creditors and could allow companies in the moratorium to ‘drift’ rather than sort their problems out.”

Details of R3’s own, earlier proposal can be found here.

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 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 recognised professional bodies
     
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.