Responding to the Insolvency Services consultation on Company Voluntary Arrangements, Encouraging Company Rescue, Nick Starling, the ABIs Director of General Insurance and Health, says:
The ABI supports effective measures to ensure viable businesses remain afloat, and Company Voluntary Arrangements (CVAs) are a good way of achieving this for many struggling companies. We support a moratorium against creditor action, giving businesses vital breathing space while they develop a rescue plan for their creditors, and the extension of CVAs to medium and large companies. These measures should reduce the number of companies that are attracted to pre-pack administrations in the future.
Allowing companies to abuse the pre-pack system has damaged the reputation of the insolvency industry. It is essential that any new regime for CVAs is appropriately supervised and the process is both transparent and fair to all creditors.
Our main concern with pre-pack administrations is that often suppliers are trading blindly with a company that knows its about to enter into a pre-pack right up until when the deal is done. Suppliers with trade credit insurance will be covered for their losses, but the lack of transparency leaves insurers facing an unlevel playing field and uninsured suppliers out in the cold.
D.C.