R3 welcomes government insolvency reforms
Insolvency and restructuring trade body R3 has welcomed the government’s steps to reform the UK’s corporate governance and insolvency framework.
R3’s president Stuart Frith has described it as the “most significant update” since the introduction of the 2002 Enterprise Act.
The Department for Business, Energy and Industrial Strategy outlined plans for the reforms in late August, with a particular focus on tackling reckless business activity.
Mr Frith stressed the need for an insolvency and restructuring framework that is “flexible, responsible and fit for purpose”, especially with Brexit looming on the horizon.
He said the reforms come at a time when other nations are also transforming their own insolvency proceedings in order to provide better outcomes for all parties involved.
R3 has praised the introduction of a business tool that provides more breathing space from creditors when a company is in distress.
However, Mr Frith has also warned of the importance of striking a balance between the needs of distressed businesses and their creditors, so that the latter can maintain confidence to supply credit where needed.
The trade body also welcomed the move to tackle directors that look to purposely dissolve a business in order to avoid paying its debts.
According to Mr Frith, the move should discourage directors from walking away from their responsibilities.
R3 has also called on the government to discuss the matter with insolvency and restructuring professionals to discuss the finer points of how the process will work.
Mr Frith added: “There already exist a number of tools available to the government, and to the insolvency profession, to tackle reckless behaviour and wrongdoing by directors, and R3 would like to see the government reconsidering how these powers can be exercised more fully.”
The efforts to tackle rogue directors form part of a move to boost transparency among UK businesses and R3 have spoken of the desire to work with other parties to strengthen the nation’s insolvency framework.
By Phil Smith