Leading Article: Undertakers who had better display integrity

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The Independent Online
INSOLVENCY administration, the subject of a report in today's Independent, is the industrial equivalent of undertaking. Its practitioners appear only when a business is already in trouble; and under British insolvency law, companies are usually corpses once they are put into the administrators' hands. The administrator must do more than dispatch the remains with discretion: more important is to recover as much as possible from the wreck. Since this may mean sacking employees and warning creditors they will not get their money back, those who take it on should not expect to be popular.

Insolvency practitioners can demand, however, to be paid reasonable and secure fees for their work. Picking up the pieces from a complex collapse can be a skilled and difficult business - the failed Bank of Credit and Commerce International left 100m sheets of paper and 400,000 disgruntled depositors across the world - so it is not surprising the bill can sometimes top pounds 1m a week. Although creditors may find it galling to see accountants take their fees before a failed company's debts are paid, without a guarantee of payment, specialists will refuse to become involved.

Yet shareholders and creditors can make two demands of the insolvency people. Those who are winding up an insolvent company should keep their fees to a minimum, and spend the money of the business whose affairs they are handling with the same thrift they would apply to their own. And they should be scrupulous in avoiding even the appearance of benefiting from the disaster they have been called in to clear up.

That is why the report on Michael Jordan, one of the Polly Peck administrators, makes such disturbing reading. There is a case for saying Coopers & Lybrand should have declined to become involved in the administration, given that it had earlier given tax advice to Asil Nadir. Mr Jordan should also have thought twice before accepting goods and services from one of the subsidiaries of a group whose administration was in his charge - even if they were paid for in full. If payment was made late and only in part for wine, flowers and use of a car, then shareholders and creditors of the collapsed Polly Peck empire can reasonably conclude that Mr Jordan has lost the moral authority to continue in the appointment - and should stand down.

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