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Firms hail rescue law reforms: but the changes may mean a less lenient Inland Revenue.

Document Cited in Related
Vincent
AuthorParry, Charlotte
PositionInsolvency Legislation

The Enterprise Act 2002, introduced last month to improve corporate recovery procedures, has been widely welcomed as a boost for the UK's "rescue culture."

"This legislation makes the rescue of an insolvent company more straightforward than it was in the past," said Malcolm Shierson, a partner in Grant Thornton's recovery and reorganisation practice. "Businesses will be rescued quicker and creditors will receive better returns than they did under the old system."

Paul Beveridge, managing director of the structured finance division at Venture Finance, agreed. Administration would become more debtor-led, he said, which meant that firms would approach their creditor's earlier to discuss underperformance and any oilier issues affecting liquidity. "This could result in a shift from rescue to the nirvana of turnaround before firms get into serious financial difficulty," he said.

Under the new legislation, which replaces the Insolvency Act 1986, the Crown's preference for PAYE income tax, national insurance and VAT will be replaced with a mechanism for a pot of funds from floating charge realisations, which will be distributed to unsecured creditors. Administrative receivership will be abolished, except in a few technical instances, and a streamlined administration procedure will operate whereby an administrator may be appointed both in and out of court.

The abolition of preferential...

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