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14/06/2018

Corporate governance and insolvency proposals would undermine UK plc

Commenting on the recently closed Government consultation on corporate governance and insolvency, Stuart Frith, president of insolvency and restructuring trade body R3, says:

“The Government’s ‘insolvency and corporate governance’ consultation proposals would fundamentally change aspects of the UK corporate landscape and culture and would undermine the UK’s attractiveness as a place to do business. The proposals create significant new liabilities for directors and new risks for investors, and could lead to businesses being liquidated rather than sold, as well as missed opportunities for business rescue and better creditor returns.

“This consultation is one of a number of recent Government consultations on insolvency, corporate governance, and director responsibility. While these consultations share themes, there is almost no attempt to tie all of the different policy proposals together. The absence of reference to the Government’s 2016 corporate insolvency framework proposals, which would better address the issues the Government is trying to tackle, is particularly notable here.

“Introducing new tools to deal with specific circumstances, as the Government proposes, is problematic. It would create inconsistency, overlap, and confusion, and would not resolve the issues which make it difficult for insolvency office holders to use their existing powers to challenge director behaviour and actions.

“The Government needs to review the existing framework of office holder powers and make changes there, rather than fragmenting the framework with impractical and superfluous new powers. The Government should also go back to its 2016 reform proposals and focus on these, and should think about ways to improve director skills and behaviour in ways which do not rely only on retrospective action such as disqualification and other sanctions.”

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.