New Government legislation set to protect failing businesses

In a new move to protect failing UK companies, essential suppliers will not be able to stop essential services to businesses during rescue talks. The new government guarantee is a bid to assist companies in administration.

Essential business services include:

• Ø  IT
• Ø  Water
• Ø  Gas
• Ø  Electricity
• Ø  Communications services

Suppliers will also not be allowed to charge premium rates whilst insolvency practitioners are attempting to find seek a viable rescue solution.

They will be guaranteed payment before others that may be owed and will be able to request guarantees of payment from the insolvency practitioner.

The supplier can also make a court application in order to terminate their contract on hardship grounds and practitioners will be urged to contact essential suppliers at the "earliest possible time" to discuss what they expect will be used.

Business minister, Jo Swinson, said;

“Continued IT and energy supplies are needed for businesses to continue trading while options are sought about their future.

“These changes will help struggling businesses during rescue while providing confidence for the suppliers that they will be paid for the essential services they provide.”

Giles Frampton, president of insolvency trade body R3, said;

"Changes to the terms of supply for insolvent businesses place unnecessary hurdles in the way of business rescue. Without reliable and affordable IT and energy supply, attempts to save a business can be stymied quickly.

"Over time, we would like to see more types of suppliers added to the list of those prevented from trying to steal a march on other creditors and take advantage of their importance to struggling businesses. It will also be important to review the impact of the requirement for Office Holders to give a personal guarantee to suppliers."

What do you think of the new changes that are due to become legislation in October? Let us know your thoughts on Twitter and Facebook and remember, Omni Chartered Accountants are here to guide your business with any accountancy issue that you may have on 01902 837 408, or you can email us at mailto:enquiries@omnitas.co.uk?subject=Enquiry

Image credit www.gov.uk - Jo Swinson MP