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IT firms supplying failing businesses will still get paid while the firms are being rescued, the Government has announced.
Business Minister Jo Swinson outlined the proposals, which aim to ensure essential suppliers of IT, water, gas, electricity and communications services will be prevented from cutting off supply or charging premium rates while insolvency practitioners seek to rescue a business.
Suppliers will be guaranteed payment ahead of others owed money for services supplied during the rescue period and can ask for guarantees of payment from the insolvency practitioner.
The IT supplier will be able to seek a personal guarantee from the insolvency practitioner at any time to give them more certainty that the supplies will be paid for, or the supplier can apply to the court to terminate their contract on the grounds of ‘hardship’.
Swinson said: “Rescuing struggling but viable businesses out of insolvency helps save jobs and improves the likelihood of payment to those owed money. Continued IT and energy supplies are needed for businesses to continue trading while options are sought about their future.
“These changes will help struggling businesses during rescue while providing confidence for the suppliers that they will be paid for the essential services they provide.
“I would like to thank those sectors who have worked with us to get the balance of these reforms right. By providing greater protections for insolvent companies during rescue, more businesses should be saved.”
Giles Frampton, president of R3 (Association of Business Recovery Professionals), added: "These proposals will make it easier for the insolvency profession to save businesses, save jobs and get creditors as much of their money back as possible. This is great news for UK plc. The UK insolvency profession is already world leading; these changes will cement that position."
The changes will be subject to Parliamentary scrutiny before coming into force in October 2015.
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