IOD calls for Paramount protection

The Institute of Directors has called on the Government to meet the costs of up to £2bn in legal claims against receivers arising from the Law Lords' controversial ruling on the Paramount case.

The IOD said the problem stemmed from "bad legislative drafting" of the insolvency laws. "Business is getting very tired of bad legislative drafting and the costs should fall on the Government, which made the mistakes in the first place."

The IOD's call came as Michael Heseltine, President of the Board of Trade, came under increasing pressure to pass retrospective legislation to save receivers from compensation claims by ex-employees sacked when their companies were wound up.

One source close to the Department of Trade and Industry said that the department's first reaction to the Law Lords' controversial ruling on Thursday was to "dig their heels in."

Thursday's judgment will make receivers and administrators liable for the severance pay and pensions contributions of employees kept on for more than 14 days following a company going bust.

Receivers can do what they like within a fortnight of taking control, but employees who escape the sack during that period are deemed to have had their contracts and pension entitlements "adopted."

Mr Heseltine passed emergency legislation a year ago saving receivers from these problems. But this week's ruling means they face action over cases occurring before March 1994 - unless the DTI makes last year's bill retrospective.

A source close to the DTI said yesterday: "There is immense Civil Service opposition to retrospective legislation. It is seen as being not constitutional. It's OK if the courts make something retrospective, as with Paramount, but not if Parliament does so."

A spokeswoman for the DTI said: "We only had the Paramount ruling 24 hours ago. There are a lot of implications for a lot of people. We have invited representations from all intersted parties. We haven't had time to form a view yet. "

Receivers were holding their breath yesterday for multi-million pound claims from directors of bust companies - the most outlandish rumour being that the estate of the late Robert Maxwell may put in a claim.

The publishing tycoon had a multi-million pound service contract which the trustees may seek to enforce, one senior receiver suggested yesterday.