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DTI refuses help after Paramount

The Government has given a final thumbs-down to any help for receivers facing up to £500m of claims as a result of a High Court ruling that allowed former employees of bankrupt companies to apply for compensation.

The source of the problem, the controversial Paramount ruling last year, was quickly overturned for future receiverships by emergency government legislation. But Michael Heseltine, President of the Board of Trade, refused to make his bill retrospective, presenting receivers with potential claims from spring 1994 to 1986.

The receivers' trade body, the Society of Practitioners of Insolvency, held secret meetings with the DTI a month ago to seek retrospective legislation to save them from such claims.

Under the ruling, employees not sacked within 12 days of a receiver taking over a company may sue for their contractual redundancy payments and pensions contributions. The ruling contradicted accepted practice by receivers going back to the original 1986 Insolvency Act.

Yesterday, the DTI announced it would not introduce such legislation, nor would it put a cap on potential claims, another request by the SPI.

The SPI said it was "appalled" and suggested it had been misled by the Government over legislative help that might be available.

Colin Bird, vice-president, said: "We regard this decision as unjust. They have let the insolvency profession down badly."

The DTI said: "We do not believe it would be right to legislate to take away from employees rights which the courts have determined they always had under the 1986 legislation."