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Government plans to stop utilities and IT service suppliers from changing their terms to struggling businesses undergoing a rescue procedure have been welcomed by the insolvency trade body R3.

The measures will prevent essential suppliers from cutting off supply or charging premium rates while insolvency practitioners work to save a business.  In return, suppliers will be guaranteed payment ahead of others providing services during the rescue period and can ask for guarantees of payment from the insolvency practitioner.

Richard Wolff, North West chair of R3 and Head of Corporate Recovery and Insolvency at law firm JMW, said the changes marked the culmination of R3’s four-year ‘Holding Rescue to Ransom’ campaign and would result in more businesses being rescued, and more jobs saved.

He said: “Changes to the terms of supply for insolvent businesses have placed unnecessary hurdles in the way of business rescue, as without reliable and affordable IT and energy supply, attempts to save a business can be stymied quickly.

“The Government’s proposals will make it easier for the insolvency profession to save businesses, save jobs, and get creditors as much of their money back as possible, all of which is great news for UK plc.”

Richard Wolff said R3 members had seen cases where retail software suppliers had demanded a major price hike to allow struggling retailers which were trying to trade through administration to continue using their tills, or similar cases where utility companies had more than doubled their tariffs.

He added: “The changes are a good example of the adaptability of the UK insolvency regime. Some have called for the wholesale introduction of a US Chapter 11-style regime, but the truth is we can incorporate the best parts of Chapter 11, like these proposals, into existing legislation.

“Over time, we would like to see more types of suppliers added to the list of those prevented from trying to steal a march on other creditors and take advantage of their importance to struggling businesses. It will also be important to review the impact of the requirement for insolvency practitioners to give a personal guarantee to suppliers.”