BPF slates govt pre-pack U-turn
By Paul Norman - Thursday, January 26, 2012 14:13
The British Property Federation has slated the government for dropping plans to introduce legislation that would have tightened the rules on the contentious use of pre-pack administrations.
The government announced today that it had dropped plans, first mooted 18 months ago by Business Innovation and Skills minister Ed Davey, to introduce legislation that would have required insolvency practitioners to notify creditors in advance of a pre-pack and allow them three days to scrutinise the proposals to ensure they represent the best deal for creditors, and to give them time to object.
In response the BPF called for immediate action to increase protection for the creditors of businesses which use pre-packs, which have "been subject to abuse and have left creditors out of pocket".
The BPF had argued that three days would be insufficient and called on ministers to extend this notice period.
Davey announced today that the reform would not go ahead due to the government's moratorium on new regulations affecting ‘micro-businesses'.
The BPF dismissed this saying that "this would have been obvious when consultation started 18 months ago".
'Pre-packs' enable fast-track administrations that avoid a failing business being sold on the open market.
An insolvency practitioner lines up an advance purchaser often for just the profitable parts of the business, with the company going into administration simultaneously. DTZ, Bonmarche, Peacocks and Blacks Leisure are notable recent examples.
Ian Fletcher, director of policy at the BPF, said: “The government has wasted 18 months reaching a conclusion that was obvious at the start of this process; that the policy being pursued would potentially breach the moratorium on regulations affecting micro-business.
“This decision leaves creditors as exposed to sharp practice as when this debate started 18 months ago. Whether by legislative or non-legislative means creditors now expect the Government to move swiftly to provide increased protection.
"The Government recognises there is an issue to be resolved, and having wasted so much time anything less than swift action would be deeply unsatisfactory.”
pnorman@costar.co.uk