When a company has worked through thick and thin to make the company work, it is always hard when they know there is no other way, other than administration. But shouldn’t the Government be helping companies in this situation, rather than hindering them?
According to R3, a trade body that represents insolvency practitioners in Yorkshire, the Government has refused to update and introduce new laws to help companies facing administration identify exactly what they should be paying for.
When a company enters administration, they usually have to pay for costs, such as outstanding supplies, rates, rent for commercial properties, and wages. But more and more companies are now being taken to court under court judgements, and are liable to pay for pension obligations as well.
A simple change in the law could clarify exactly what a company is liable to pay for, therefore making the process a lot simpler and cost effective.
Speaking of the administration process, Andrew Walker, Yorkshire Chairman and Partner at Irwin Mitchell, expressed: “These court rulings and the continued uncertainty has had an unhelpful impact on the UK’s rescue culture, with far reaching, adverse consequences for the UK economy.
“Tinkering with the existing priority system makes it harder to bail out stricken businesses and means other creditors lose out. The Government is aware of the problem but seems to be unprepared to act.
“It has huge consequences on the ability to rescue businesses, the lending culture, and returns to unsecured creditors. The extension of the scope of what is an administration expense is bound to make lenders more sceptical about the value of their security and hence their willingness to lend to certain businesses.”
There isn’t a day goes by when there isn’t a story about a company struggling or one that has just entered administration. So with the situation on the rise, and companies not knowing where they stand, should the Government step in? Or do you think a company should be made liable for everything? But isn’t a lack of finances what got them into that predicament in the first place?
