Protection call from Cameron
US-style bankruptcy protection should be introduced for companies at risk of being destroyed by the credit crunch, David Cameron was due to argue today.
The Tory leader warned that tens of thousands of jobs could be lost unless fundamentally sound businesses are given “breathing space” to establish new finance.
He called for a British version of the American Chapter 11 system, where struggling firms are given court protection while they try to hammer out a deal with creditors.
In a speech to the CBI in London, Mr Cameron will say: “The credit crunch has meant more companies are finding it hard to get the money they need to keep their business alive.
“That means one thing - more companies going into liquidation. And we all know what liquidation means - job losses.”
He will add: “This change will ensure that fewer good companies end up in liquidation - and fewer people lose their jobs through no fault of their own.”
Companies filing for Chapter 11 in the US retain control of their assets and day-to-day operations while negotiations take place in the Bankruptcy Court.
The Tories say similar restructuring deals are done regularly in the UK, but they are difficult and inefficient due to a lack of established rules and procedures.
Under the Conservative plans, courts could grant protection against creditors pushing a company into insolvency if it had a “real chance” of restructuring successfully.
According to insolvency practictioners Begbies Traynor, which has an office in Great Ayton, in the first four months of the year 506 North-east companies suffered from “critical problems” - more than five times the number in the same period last year - as the credit crunch and rising commodity prices begin to take their toll.
Andrew Priestley, a stockbroker for Middlesbrough-based Redmayne-Bentley, said the country was moving from “a crisis of liquidity to a crisis of solvency”.
