Don’t turn it off — supplying services during formal insolvencies

The government has launched a consultation on its proposals to force more crucial suppliers to continue to supply their services during formal insolvencies, irrespective of any pre-existing debts.

The proposals would expand the scope of the current regime, which secures gas, water, electricity and communications services from certain suppliers, to include more suppliers and extra services. The current law dates from the 1980s. The rules prevent affected suppliers from either withdrawing their supplies or demanding ransom payments because of a customer’s insolvency. The justification for this erosion of a supplier’s freedom to contract on agreed terms is to avoid: greater pressure on an insolvent business’s finances at a critical time, ‘damaging the chances of survival by preventing funds being used to facilitate a rescue’; or certain creditors receiving preferential treatment at the expense of others, ‘obviating the basic insolvency principle of all creditors in the same class being treated equally’…

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