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Government set to investigate rules on administration

Published: 12 January 2009
The rules covering how a firm can be placed into administration are to be reviewed by a panel of MPs later this month.
Government set to investigate rules on administration
The current economic climate has seen a sharp rise in the number of companies failing and being forced to call in insolvency experts.

However, the Government is concerned at the way some firms, like Whittards, enter administration write off debts and are quickly bought by new owners.

MPs fear the current system is being abused with suppliers being hardest hit and often left with no choice but to continue trading with the 'new' firm knowing their original debt will never be paid.

As a result of these concerns Stephen Speed, head of the Insolvency Service, will face the Business and Enterprise Regulatory Reform Committee on January 27.

Committee chairman, Peter Luff, is promising 'pre-packed' administrations will be 'at the top of our agenda' at the meeting.

"There are growing concerns about the way some businessmen are using pre-packaged administrations as a way of getting out of their debts and other obligations," Mr Luff told the Independent.

"Given the current economic situation, it is timely to look at the Insolvency Service, both to assure ourselves of its efficiency and to give the public the opportunity to raise any concerns."

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