Insolvent? Don't worry, it's just a rite of passage

A Business Rescues Act would rescue the image of insolvency as well as more companies, writes

For all the similarities between British and US business cultures, there is at least one important difference: the attitude to failure. It is often commented that while we tend to look upon the owner of a collapsed business as some sort of crook (even if no fraud or the like is involved), the Americans regard such episodes as rites of passage.

As a consequence, they have the Chapter 11 bankruptcy protection procedure - and we have a rather more complex situation that might appear to benefit insolvency specialists more than companies and their creditors.

It is not that there is a lack of interest on this side of the Atlantic in rescuing troubled companies. The mid-1980s saw an attempt to ape parts of Chapter 11 by introducing the concept of administration - designed to help insolvency practitioners save at least part of the business - and now the Government is proposing a further refinement - a 28-day moratorium on debt for companies facing bankruptcy.

The Society of Practitioners of Insolvency believes this is basically a good idea, but warns that it might give rogue directors too much scope to bleed a company of its remaining assets.

However, John Alexander, head of corporate recovery at accountants Pannell Kerr Forster, has another suggestion. He feels that take-up of the company voluntary arrangement procedure - basically a private deal between a company and its creditors - is low because directors are reluctant to enter into an insolvency situation. In other words, it is that old suspicion of failure syndrome.

Such a perception problem could be dealt with by including all the rescue procedures - CVAs, administrations and administrative receiverships for companies, partnership voluntary arrangements and administrations and individual voluntary arrangements - in a Business Rescues Act, Mr Alexander believes.

While admitting that the Government is unlikely to take the parliamentary time to merely deal with perceptions, he thinks such a "respray" could do much to bring about a more positive view of insolvency. Because it is not just the directors that distrust the procedure. "The experience of most creditors is that when it comes to insolvency they end up losing money, which leads to a lack of confidence in insolvency," he says.

The submission on the consultative document "Revised proposals for a new Company Voluntary Arrangement Procedure" which he made just ahead of the 31 July deadline also highlighted the need for increased powers for nominees - the insolvency practitioners who supervise the deal-making. He pointed out that, contrary to common belief, they do not have the authority to protect the interests and control the activities of the company and its directors.

"We believe that the nominee should either be given specified powers or just provide advice on the form of the proposal for a CVA and have no further role in monitoring the business," he says.

PROMOTED VIDEO
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Accounts Payable

    £12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

    Technical BA - Banking - Bristol - £400pd

    £400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...

    Account Management Strategy Manager

    £38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice