Help for firms facing administration

Larger contractors could be given extra breathing space to save their businesses when they face the threat of going into administration.

The Insolvency Service has launched a consultation on plans to give companies with a turnover of more than £6.5m the same protection as smaller firms.

The move would give bigger companies more room to manoeuvre while they seek legally binding Company Voluntary Agreements (CVAs) with their creditors, without first having to place their companies into administration.

Business Minister, Pat McFadden said: "The Government is focused on helping companies in difficulty. Giving more businesses extra breathing space will encourage company rescues. It could make all the difference between a firm staying in business or entering insolvency - preventing the knock-on effects that failures have on employees, directors and creditors."

Currently only small companies facing financial difficulty are able to obtain a moratorium on creditor action while seeking agreement with their creditors to deal with their debts. The new proposals would extend this to larger businesses.

The proposed changes will help to give all companies access to the new funds they need to get back on their feet. Investors who put new money into a company in either a CVA or administration would be at the top of the list for getting money back if the company eventually fails.

Such a measure would make it more attractive to lend to such companies, allowing them to access funding they need when they need it most.