Kenneth Cork, doyen of receivership and liquidation practice, is campaigning within his Insolvency Law Review Committee for a proposal championed by solicitors but which has not yet won the backing of the Accountancy Bodies in their submissions.
He told the Wilson Committee looking into the functioning of financial institutions on which he also sits: ‘We are contemplating the ability to appoint somebody who would have much the same power as a receiver but was called an administrator, and he will be able to put the company on ice while people have time to think’. He followed this up with a speech last week to members of the Institute of Credit Management, where he is president, outlining the proposals.
The principal advantage enjoyed by receivers is immediacy, going into a company on behalf of a bank, for example, overnight to secure their interests. But in the case of a creditor’s voluntary liquidation, notice must be given and in the ensuing hiatus detrimental changes can take place within the debtor company and in its relationship with suppliers outside. The basic premise is that there should be a general moratorium under the aegis of the new administrator, who would be immediately installed to head off unfavourable developments.
The solicitor body, which took the lead in this proposal, was the City of London Solicitors Company, for which a nephew of Kenneth Cork, Colin Cork of Nathan Oppenheimer & Vandyck is one spokesman. This far-reaching suggestion is new to the CCAB committee preparing submissions to Mr. Cork’s Insolvency Committee, though a spokesman agrees that the gap in the current procedure represents a ‘real problem’. The CCAB is presenting its submissions piecemeal to the Insolvency Committee in order of priority, so will have ample opportunity to declare its view on this topic in due course.
The Committee of London Clearing Bankers has seen an outline of the proposal, but says it has not yet been given time to consider its details. ‘Receivership is of far greater importance to the banks,’ a spokesman says, ‘while the change does not affect that, the speedier action would be welcome to creditors. Our own submissions to the Cork Committee are not complete, but this change would seem of more particular importance to accountants’.
The passage of the administrator proposal will not be a bed of roses. ‘It is just something the committee is considering,’ is another view being expressed.
The powers of secured creditors are also being attacked in submissions to the Cork Committee, which has already collected the views of 110 bodies and individuals. In the latest Three Banks Review, Professor R.M. Goode of London University questions whether secured creditors (commonly the bank) are not too secure. ‘This is one of the vital questions currently under consideration by the Cork Committee,’ he says.
Picture Credit: http://images.npg.org.uk/120_120/2/9/mw08129.jpg