Insolvency reform under threat as Mandy departs

The future of insolvency law reform is in doubt after the abrupt departure of Secretary of State for Trade and Industry Peter Mandelson.

Insolvency lawyers are questioning whether planned reforms will take place in spite of Mandelson's departure. Mandelson planned to reduce the burdens of insolvency.

The fate of the proposed moratorium for smaller companies as part of a Company Voluntary Arrangement is uncertain, although the Department of Trade and Industry (DTI) hopes to introduce it in the current legislative session.

But Mandelson planned other unspecified measures to reduce the stigma of bankruptcy. He also questioned the Crown's preferential creditor status and called on the Inland Revenue to be less aggressive at calling in debts.

Stephen Gale, head of corporate rescue at Herbert Smith and deputy vice-president of the Society for Insolvency Practitioners, says: “Whether or not those two initiatives fall with Mandelson I don't know, but he was very much the protagonist and I think it's fair to say that some of the DTI officials were waiting to catch up with him.”

A DTI spokesman says: “Those ideas were not exclusive to Mr Mandelson and it's not impossible that they will be continued.”

The 1982 Cork Report recommended that the Crown should lose its preferential status. According to a Law Society spokesman, the idea has been vetoed by the Treasury. He added that reducing the burden of bankruptcy would require a change of culture, with the Government working to alter the attitude of banks.