The Chartered Institute of Credit Management (CICM) has expressed concerns over a recent move proposed by the government, which could have serious consequences for creditors.
The move proposed, similar to the USA’s chapter 11, aims to ensure businesses that are distressed yet viable can be rescued quickly from insolvency. The government has previously stated that having an efficient and effective insolvency regime is one of the ways to promote entrepreneurship, investment and employment.
The CICM has warned that such a move would have a huge impact on the cashflow of SMEs and thousands of businesses in the supply chain.
While the new government proposals don’t seek to support failing businesses without any hope of recovery, the CICM believes it will be a fine line to distinguish the good from the bad. This means that the system may be open to abuse.
Moratorium
One of the biggest concerns is the proposal to create a new moratorium, which would provide companies with an opportunity to consider the best approach for rescuing the business whilst free from enforcement and legal action by creditors.
The proposed moratorium would last for three months, with the possibility of an extension if needed.
Philip King, chief executive of the CICM, has warned:
“A moratorium is not intended to allow failing businesses merely to buy time with creditors when in practice there is no realistic prospect of a rescue or compromise being reached.
“Viewed positively, this is a 90-day window for a company to work with a supervisor to turn the business around, save jobs, and secure a long-term future.
“Looked at another way, it is 90 days in which the less scrupulous can fritter away assets whilst being ‘untouchable’, to the serious detriment of creditors and the stability of the supply chain.”
Portfolio
Portfolio can help you hire skilled professionals for your company who can ensure you are able to chase debt effectively, such as credit managers or credit control officers.
Get in touch with our recruitment consultants by calling 020 7650 3199 or register your vacancy today.
View Our Resources
Important interview questions to ask a credit manager candidate
CVs and covering letters can only tell you so much about a candidate. When recruiting a Credit Manag...read more
Credit Manager
Credit manager is naturally one of the most important roles within a company. They have the day...read more
Looking ahead to 2014
The arrival of the new year gives companies a chance to reflect on the past 12 months, and more...read more
Why is Credit Control recruitment important?
It is vital to have good Credit Control staff in place, particularly for small to medium-sized busin...read more