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Continuity of Supplies by Utility Companies

By F A Simms

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The government has plans to consult on proposals that will require utility companies and other key suppliers to continue to supply insolvent companies while they go through a business rescue process. These proposals, if passed could help save up to 2,000 businesses a year.

 Giles Frampton, R3 President says: “Contract cancellations and “ransom” charges which take effect on insolvency are one of the biggest obstacles to business rescue that Insolvency Practitioners come across. They force the closure of potentially viable businesses, posing unnecessary risk to jobs.”

By scrapping termination clauses it will give many struggling businesses a better chance of survival and should boost the UK’s business rescue culture. Business rescue is in the interests of both creditors and insolvent businesses so scrapping this clause will no doubt help to increase chances of success. Turning a business around can be a much better outcome than that of a business being liquidated for all parties involved.

 The proposals in effect will mean suppliers will continue to supply goods and services to an insolvency practitioner who is trying to rescue a business.

Published August 2014