Thu, 26 May 2011 | BUSINESS NEWS
The Government’s proposed new rules, designed to slow down the controversial pre-pack administration, have been disputed by some of the globe's largest accountancy firms.
Ernest & Young, Deloitte, KPMG and PricewaterhouseCoopers, as well as the insolvency practitioners’ trade body R3, have demanded a meeting with Ed Davey, the Business Innovation and Skills Minister, in order to voice their opposition to the reforms.
The Insolvency Service, a division of the Department for Business, Innovation and Skills, wants to set up an independent body to review complaints made about fees levied by administrators and liquidators, amid concerns that unsecured creditors are being charged too much.
The administrators say the changes could lead to smaller creditors waiting until the end of the administration process to make complaints. There is also the risk that the process could be disrupted by smaller creditors at the expense of others.
“These new proposals give the green light to malicious complainants to hold up the process and leave unsecured creditors with nothing,” Frances Coulson of R3 said.
"There is a strong consensus that there is something wrong here. We support measures to give unsecured creditors more of a say, but the degree of increased regulation proposed is disproportionate and counter to Government policy to reduce red tape. The proposals are likely to reduce returns for creditors, while undermining what is good and sensible in the current system."
In a report by the Office of Fair Trading in 2010, it was discovered that in over a third of cases, secured creditors were reimbursed in full while unsecured creditors, who are not likely to see their money again, were being charged nine per cent more in administrators’ fees.
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