New proposals which would grant greater insolvency protection to creditors of insolvent businesses have been included in a new consultation paper put together by the Government.
The measures, designed to ensure standards are properly upheld in businesses that are facing insolvency, comes following a number of high-profile company collapses in the last 12 months, which have left thousands of creditors with outstanding debts.
Announcing the new consultation, Business Secretary Greg Clark acknowledged that Britain had a “good reputation internationally for being a dependable place to do business, based on high standards,” but suggested that reforms were needed to ensure such high standards are maintained when it comes to businesses that are facing insolvency.
He said that more needed to be done to ensure that creditors and suppliers do not lose out by reversing “inappropriate” asset stripping where possible.
He added that the Insolvency Service need powers to properly investigate the directors of any dissolved companies and believes shareholder’ responsibilities should be strengthened.
“These reforms will give the regulatory authorities much stronger powers to come down hard on abuse and to make irresponsible directors bear the consequences of their actions,” said Mr Clark. He acknowledged that lessons needed to be learned “in the light of some recent corporate failures” such as the Carillion collapse.
The outcome of the consultation will be revealed in a report entitled Insolvency and Corporate Governance, which is due to be published later this year.
The new consultation is the second new measure taken by the Government in light of the collapse of Carillion, with the Chancellor, Philip Hammond already proposing a crackdown on the UK’s late payment culture.
The suggested late payment penalty system would part of HMRC’s ‘Making Tax Digital’ initiative, aimed at simplifying and standardising administration across taxes.
It coincides with the introduction of a new points-based system for late tax returns, which is expected to be rolled out from April 2019.
HMRC’s proposal would introduce three brackets of penalty, depending on when the payment was or wasn’t made:
- No penalty if payment (or a time to pay arrangement) is made within 15 days of the due date
- A 5 per cent penalty of the tax outstanding if payment (or a time to pay arrangement) is made within days 16-30
- A 5 per cent penalty of the tax outstanding if there’s no payment (or time to pay arrangement) from day 31
If you are interested in how these changes may affect your position as a creditor in future, speak to our team.
