ICM welcomes delay as Government reviews decision on ‘Phoenix’ Insolvencies
23 August 2011
The Institute of Credit Management (ICM) has welcomed news that the Government is to delay the introduction of new rules to crack down on ‘phoenix’ companies resulting from ‘pre-pack’ administrations, taking the Insolvency Services’ hesitation as “firm evidence that the issue is at last being taken seriously and that the voices of smaller, interested business parties are being heard,” says ICM Chief Executive, Philip King.
The sticking point has been around a three-day notice period for connected parties ahead of a pre-pack deal that the Government wanted to make law: “The danger in any notice period is that credit may be withdrawn altogether, and that publicising a company’s difficulties can destroy any remaining value in that business, and ironically lead to increased liquidations,” he says.
“Conversely, any form of notice period is preferred, since it is the creditors who often have a much better knowledge of the business than the administrator, and are therefore better placed to make IPs aware of issues that they might otherwise remain ignorant of.”
Philip says that the main contention over pre-packs is the lack of transparency: “Not all pre-packs are wrong,” he says, “and indeed there will be many occasions where they are wholly appropriate for all concerned.
“But when an Insolvency Practitioner states in his judgment that the deal ‘is in the best interests of creditor’, making sure the creditor has proper time for their concerns to be raised will go a long way to improving their perception.”
Philip says that clearly the complexity of this issue is at last being understood: “We remain committed to working with those in the insolvency profession for better outcomes, and this delay means that a proper debate can be had in which the ICM and its Members will continue to play an active role.”