Banks and receivers plan Lords appeal over rescues
Roger Powdrill of Touche Ross, the administrator of Paramount Airways, yesterday confirmed that he had received leave to appeal against the Court of Appeal decision on 22 February that plunged Britain's company rescue specialists into crisis.
Last month Michael Heseltine, President of the Board of Trade, overturned the worst effects of the Appeal Court's recent decision on Paramount, which would have forced receivers to sack whole workforces within 14 days when they were sent in to rescue a company, but the Government decided that retrospective legislation would be unconstitutional.
This has left receivers, and the high-street banks that appoint them, with the threat of claims for millions of pounds from directors sacked between 1986 and the passing of Mr Heseltine's bill last month.
If a director of a failed company won such a claim, the receivers would have to reclaim the money from creditors to whom they had already made payouts - mainly the high-street banks.
The fear and uncertainty created by the Paramount decision has prompted many receivers to withhold funds that they would normally have paid straight over to creditors, mainly the banks, in case former employees might bring claims.
For instance, Ernst & Young, the former administrators of the Canary Wharf development in London's Docklands, are already facing a pounds 12m claim from three former directors of O&Y relating to severance terms in their employment contracts.
The appeal will probably be heard in October, and could cost pounds 200,000. Normally it would be funded from creditors' funds in the Paramount administration. But the groups decided that the threat to Britain's 'rescue culture' merits independent funding. The Society of Practitioners of Insolvency is co-ordinating the fund.
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