Saturday, March 16, 2013
UK Government Reviews Insolvency Rules That Let Firms Dump Schemes
Fri., March 15, 2013
The government has launched a review of pre-pack insolvencies, the controversial practices that can enable companies to dump pension liabilities, Professional Pensions reported. The Department for Business, Innovation and Skills said the review, announced during a parliamentary debate, would begin in "late spring" although a timescale had yet to be set. Pre-packs involve arranging the sale of a business before an insolvency is triggered, with the transaction going through as soon as an administrator is formally appointed. As with any type of insolvency, unsecured creditors such as defined benefit pension schemes tend to lose out from the process. BIS said approximately 85% of the business sold though pre-pack were so called ‘phoenix companies', acquired by former managers or owners. The practice, which accounts for about a quarter of all insolvencies, is not specifically provided for in insolvency legislation but has arisen out of practice and through judicial approval.