The review group has made 16 specific recommendations across five broad areas which are, in summary, as follows:
Development of the rescue culture and collective insolvency procedures
Floating charge holders should lose the power to veto administration orders.
The insolvency profession should consider changing its practice so as to retain existing management (in appropriate circumstances) in administrations more often and so reduce costs.
A possible moratorium for the Section 425 CA 1985 scheme of arrangement procedure should be considered
An advisory committee should be established to review and monitor the insolvency laws and a programme of research should be initiated into the impact of corporate voluntary arrangements (CVAs), administrations and administrative receiverships, supported by the Government, banks and the profession.
The Crown as preferential creditor
Revenue and Customs should develop a more commercial approach to CVAs and use their discretion rather than insisting on being paid in full. They should establish a central specialist unit to deal with CVA proposals and have clear terms of reference to ensure that “commercially sound” solutions are reached, using private sector skills where possible. Revenue departments should consider providing insolvency warnings to companies in difficulties. Financial health checks could be developed by the Insolvency Service to encourage small firms to raise the standard of their financial and business management.
Directors: their education and conduct
The Insolvency Service should consider ways of speeding up the process of deciding whether to bring proceedings against the directors of an insolvent company so that if a decision not to proceed has been made, a director can be told and R3 should demonstrate that its change of name from the Society of Practitioners of Insolvency to the Association of Business Professions should be matched by a real change of approach to the problems of companies in distress.
Reporting accountants' perceived conflicts in becoming administrative receivers
The perception of accountants' conflict of interest in accepting appointments on cases where they have also been reporting accountants should be dealt with by the banks accepting, in their Statement of Principles, that if the company disagrees with the accountants' conclusions, another firm should be appointed. Likewise, the accountants should change their ethical rules. The new Insolvency Practices Council should provide the public interest input.
Financing of business rescues
The law on CVAs and administrations should be changed so that a lender's fixed charge on debtors should not apply to debts created during the insolvency process to enable funding of the process with sale proceeds. Also, the law should be changed so that a landlord's right of peaceable re-entry should no longer be exercisable in an administration or CVA – this will occur when the Insolvency Act 2000 becomes law.