Insolvency change refused: DTI rejects plea to make Paramount bill retrospective

THE GOVERNMENT rejected an amendment to its emergency bill on the Paramount ruling yesterday that would have spared insolvency practitioners an estimated pounds 1bn of claims from sacked employees of bankrupt companies.

Neil Hamilton, the Trade Secretary, also refused to accept an amendment that would have protected thousands of Law of Property Act (LPA) receivers.

Mr Hamilton did, however, leave room for similar amendments to be proposed today in the Lords, as the bill to reform the 1986 Insolvency Act completes its final stage.

The emergency bill reversed an appeal court ruling that would have made thousands redundant. But it only applies to cases after 15 March 1994, the day after the legislation was announced. From now on, receivers will not face the prospect of sacking an entire workforce within two weeks of taking over an ailing business to avoid compensation claims.

The Confederation of British Industry pointed out yesterday that accountancy firms will still face an estimated pounds 1bn in claims unless the Government makes the bill retrospective. If insolvency practitioners are not protected from past claims, the CBI said, the accountancy firms that employ them could collapse.

Labour and Liberal Democrat MPs joined yesterday to table a 'probing' amendment making the bill retrospective. They withdrew it after Mr Hamilton explained he was against retrospective legislation in principle. But he did accept there was a serious issue at stake.

The minister said that with a retrospective bill 'we could not be certain who would be benefited or disadvantaged'. In particular, it was not clear what would happen to the rights of the Paramount employees who brought the appeal.

A further attempt to have the bill backdated will be made in the Lords today by Lord Ezra. He will also move that LPA receivers be covered. They are surveyors employed by banks and building societies to secure single assets such as office blocks and hotels.

LPA receivers may need to retain employees of hotels, say, if they want to sell the property as a going concern.

The CBI, the Society of Practitioners of Insolvency and the Royal Institute of Chartered Surveyors were all lobbying last night in a final attempt to change the Government's mind, both on retrospective legislation and LPA receivers.