Insolvency blueprint comes under Faculty scrutiny
The Faculty has identified improvements it believes could be made to a blueprint for a new corporate insolvency framework.
The UK Government, through The Insolvency Service, is seeking views on whether legislative change would improve the UK corporate insolvency regime and “provide a better environment to achieve the successful rescue of a viable business.”
One proposal in the consultation is a new, three-month moratorium to give companies a chance to consider the best way to rescue the business while free from enforcement and legal action.
In its response, the Faculty said: “It is not clear to us what are to be the statutory grounds on which a creditor would have the right to apply to the court for an order terminating the moratorium…the grounds must be stated more precisely than the criteria which are mentioned in paragraph 7.12 (of the consultation), namely ‘where [the creditors’] collateral or interests are not sufficiently protected’.
“We doubt, on a very practical level, how quickly the Scottish courts, even the Court of Session, would be able to dispose of any challenge by a creditor.”
It is proposed that creditors would have the right to request information in a moratorium, but the Faculty said: “We see significant practical issues arising from this proposal...It might be appropriate to impose a requirement that only one or more creditors with a specified minimum indebtedness can request information.”