New rules ‘could save insolvent companies’

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More than 2,000 businesses could be saved each year by measures to prevent utility companies and other key suppliers from demanding “ransom payments” from insolvent companies, according to a trade body.

The insolvency organisation R3 has welcomed the news that the government has launched a consultation on new measures to prevent IT and utility suppliers from cancelling contracts with insolvent companies and increasing charges.

The new rules would require them to continue supplying goods and services to an insolvency practitioner trying to rescue a business.

Richard Wolff, North West regional chair of R3 and Head of Corporate Recovery and Insolvency at Manchester law firm JMW Solicitors LLP, said the news meant that R3 was one step closer to success in its long-running “Rescue to Ransom” campaign.

He indicated that typical examples included retail insolvencies, where insolvency practitioners often have to make “ransom payments” to software suppliers to allow stores to continue operating tills and accepting card payments.

Mr Wolff said: “Our members estimate that banning so-called ‘termination clauses’ in supply contracts could help save over 2,000 businesses a year.

“R3 has campaigned long and hard for action to be taken on termination clauses, winning support from the business and creditor communities.”