The move follows the Paramount case last month in which the Court of Appeal improved the status of employees' claims for money from receivers and administrators.
The decision means receivers and administrators will have to honour employees' contracts in full if they keep them on, making receiverships and administrations more expensive and risky.
Bankers and insolvency experts believe many companies will now be closed down and their assets sold, with attempts to trade them back to health abandoned.
Measures being examined by lawyers include using an order in council to vary parts of the Insolvency Act, repealing key sections or in extreme circumstances asking the Government to introduce a new bill to solve the problem. But so far the Department of Trade and Industry has given no indication it is willing to use Parliamentary time to solve the problem.
If a receiver needs to employ a company's staff 14 days after appointment, their contracts of employment are automatically adopted. To change the contracts, they must be renegotiated within the 14-day period. These must be genuine contracts that could load heavy extra costs on receivers and administrators.Reuse content