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Insolvency and suppliers, demand and supply

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It has been reported that the government is backing the insolvency profession by creating proposals to prevent suppliers holding struggling business to ransom. Suppliers such as utility providers can terminate a contract where a business enters into a formal insolvency procedure and demand higher fees for the same service. The Government has tabled an amendment to the Enterprise and Regulatory Reform Bill (“the Bill”) to prevent IT suppliers taking advantage of an insolvency situation by increasing their charges as a condition of supply.

This is a welcome move for insolvency practitioners (“IP”) who currently have no option but to pay the higher tariffs and for creditors who may find more funds available for distribution as a result.

However, under the changes, the suppliers will have a right to request a personal guarantee from the IP for payments which are due post completion. Just how many IPs will be willing to do this?

In respect of the Bill, R3 President, Lee Manning, says “it will stop those suppliers from seeking an unfair advantage over other creditors by increasing charges and payments as a condition of their continued work”.

The second day of the report stage in the House of Lords is scheduled for today (4 March 2013) so watch this space.

By commercial solicitor, Nicola Whittle