Vendors must continue to supply insolvent firms

5 March 2013

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5 March 2013 | Anna Reynolds

Suppliers of IT and other essential services will be forced to continue supplying insolvent businesses under UK government proposals.

In an amendment to the Enterprise and Regulatory Reform Bill, which is currently before Parliament, essential suppliers in the IT and utilities sectors will be required to continue to supply goods and services when an insolvency practitioner (IP) is trying to rescue a struggling business, unless specifically released by the IP or the court.

The changes, tabled by under-secretary of state for business, innovation and skills Lord Younger, will also prevent those suppliers from increasing charges or demanding the payment of debts as a condition of continued supply.

Consumer affairs minister Jo Swinson said: “This is good news for employees of insolvent businesses, creditors and insolvency practitioners who are trying to rescue ailing companies.

“Businesses are currently closing down because restructuring professionals are unable to secure the essential supplies they need to continue trading while they restructure or seek a buyer. This measure will ensure they can secure the supplies they need to deliver the best outcome for creditors and employees.”

Safeguards will be provided to ensure suppliers who are obliged to continue supplying the insolvent business are protected.

Lee Manning, president of the insolvency profession’s trade body R3, said: “R3 has been campaigning on this issue for over two years and our research reveals that more than 2,000 businesses a year could avoid closure if suppliers continued to supply at the pre-insolvency terms.

“This victory for common sense recognises that legislation has not always kept pace with changes in public utilities ownership and highlights the importance of IT when running a business in the 21st century. Struggling businesses need a flexible and up-to-date insolvency regime to allow them the best chance of survival.”

The government said it would consult on the impact of the proposals before implementing the proposed powers.

Birmingham, West Midlands
HS2 Ltd
London (Greater)
£50,800 plus up to £10,000 Recruitment Retention Allowance
House of Lords
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