The government is set to ignore the concerns of insolvency specialists with the promise that its Bill, introducing a moratorium on company voluntary arrangements, will be pushed through as soon as possible. Insolvency Services deputy inspector general Desmond Flynn told the Commons Trade and Industry Committee last week that a Bill was inevitable - despite wide-ranging criticism from the Society of Practitioners of Insolvency, the Law Society, and the British Bankers Association. Trade secretary Stephen Byers has taken up the mantle of the previous government with promises that the UK will foster a rescue culture and introduce a moratorium to help directors of struggling small companies produce a rescue plan during a 'closed period'. But at last week's committee hearing, successive witnesses picked major holes in the current Bill, which provides a moratorium only during the time in which a fully developed plan is being discussed with creditors, a window that could be as short as a few weeks. This has been condemned as a shift away from the original promises, and many question how useful it will be because all the preparation work could incur huge expenses. And no mention is made in the Bill of how a business could fund its additional trading if its bank decided to stop lending. A source close to the discussions said: 'The whole thing is riddled with contradictions. This is not what we were expecting. The problems were all aired in 1995 during the last round of discussions about a moratorium and the government has had plenty of time to ignore our concerns.' The government also came under fire for another clause which would allow the secretary of state to 'require any person appointing an administrative receiver of a company to have given a warning notice to the company'. This clause was developed to force banks to give written notice before moving in to appoint a receiver - on the assumption that banks would rather push small companies into receivership than see them trade out of difficulty. Although agreeing that new codes of conduct have been effective in making banks more friendly towards their customers, he said that these 'had a certain novelty value and another recession might pull the best intentions apart'. Observers are not expecting any major changes in the clauses and many are worried the proposed extra powers for the secretary of state could allow him to make alterations without further consultation. The English ICA summed up the widespread belief that 'while we support a moratorium as part of the existing CVA procedure, we do not believe that the draft clauses will actually achieve this result'.
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