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Failed directors are let off hook under bankruptcy law’s shake-up

A radical shake-up to bankruptcy law last week allows directors at failed firms to remain in charge – and will shield them from creditors for up to 40 days.

The Corporate Insolvency and Governance Act introduces so-called ‘debtor in possession’. 

This forces suppliers to continue to fulfil contracts even when they have not been paid. Up until now, only essential utilities were obliged to continue to supply insolvent companies.

Bankruptcy law: Company directors will be shielded them from creditors for up to 40 days

Bankruptcy law: Company directors will be shielded them from creditors for up to 40 days

Bankruptcy law: Company directors will be shielded them from creditors for up to 40 days

Clive Chalkley, partner at law firm Gowling WLG said: ‘All insolvency legislation is about striking a balance. 

But the more anti-creditor our rules become, the less likely investors will want to come here, or at least they will demand higher returns to compensate for higher risk.’

Chris Laughton, corporate restructuring partner at accountant Mercer & Hole, warned: ‘This could lead suppliers to move to short-term contracts in order to escape the new requirement.’

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