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.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
Sport
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
Sport
Esteban Cambiasso makes it 3-3
premier league
PROMOTED VIDEO
Sport
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
News
people'I hated him during those times'
News
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
News
i100
News
Dame Vivienne Westwood has been raging pretty much all of her life
peopleFirst memoir extracts show she 'felt pressured' into going out with the Sex Pistols manager
Arts and Entertainment
Lauryn Hill performing at the O2 Brixton Academy last night
musicSinger was more than 90 minutes late
Sport
Lewis Hamilton in action during the Singapore Grand Prix
Formula OneNico Rosberg retires after 14 laps
News
i100
News
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Arts and Entertainment
tvReview: 'Time Heist' sees a darker side to Peter Capaldi's Doctor
Finacial products from our partners
Property search
Latest stories from i100
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

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam