New rules could prevent certain pre-packs from proceeding
27 March 2015
Newly introduced legislation will allow the government to create new rules that could stop certain pre-pack arrangements from proceeding.
Fri, 27 Mar 2015Newly introduced legislation will allow the government to create new rules that could stop certain pre-pack arrangements from proceeding.
The government announced today (27 March) that Royal assent has been given to two acts that make changes to insolvency legislation.
Included in the changes is a reserve power that will enable government to create regulations to stop administration sales to connected parties.
The reserve power could also impose conditions or requirements that would enable such sales to proceed.
This power, which lapses five years after coming into force, would only be used if voluntary measures around scrutinising such deals announced in the Graham Review prove unsuccessful.
To increase transparency in pre-packs last summer better regulation expert Teresa Graham recommended that creditor and insolvency organisations should develop a process to independently scrutinise sales to connected parties.
Earlier this month, the government announced that a steering group made up of such organisations has taken forward Graham’s recommendation in the form of a pool of independent business people. It is expected to start scrutinising these deals from this summer.
Recruiters have gained a reputation for entering into such arrangements when faced with situations such as tax liabilities, leases they wish to exit and other circumstances in which it is seen as more financially beneficial to ‘do a phoenix’ than continue their current business as is.
The government announced today (27 March) that Royal assent has been given to two acts that make changes to insolvency legislation.
Included in the changes is a reserve power that will enable government to create regulations to stop administration sales to connected parties.
The reserve power could also impose conditions or requirements that would enable such sales to proceed.
This power, which lapses five years after coming into force, would only be used if voluntary measures around scrutinising such deals announced in the Graham Review prove unsuccessful.
To increase transparency in pre-packs last summer better regulation expert Teresa Graham recommended that creditor and insolvency organisations should develop a process to independently scrutinise sales to connected parties.
Earlier this month, the government announced that a steering group made up of such organisations has taken forward Graham’s recommendation in the form of a pool of independent business people. It is expected to start scrutinising these deals from this summer.
Recruiters have gained a reputation for entering into such arrangements when faced with situations such as tax liabilities, leases they wish to exit and other circumstances in which it is seen as more financially beneficial to ‘do a phoenix’ than continue their current business as is.
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