UK government decides against EAPO adoption

A decision has been taken by the government that could help British firms seeking insolvency advice in future.

Westminster has elected to exclude itself from European regulation changes that would see foreign bodies have the ability to get the funds of UK companies frozen while disputes over creditors and debts are ironed out.

Britain is renowned for its rescue culture, with systems in place to allow insolvency practitioners to attempt to save organisations that have run into financial difficulties.

However, insolvency trade body R3 has been lobbying parliament not to adopt the European Union's European Account Preservation Order (EAPO) ruling.

This seems to have paid off, with the government deciding that it would not be in the best interests of the British private sector to allow foreign administrators to freeze bank accounts using an EAPO, citing the "lack of adequate safeguards" for those involved.

Had ministers accepted the rule change, British firms could have had creditors around the continent freezing their assets until bills are paid.

While it is obviously right that those owed money receive it, the ability to ring-fence large sums could cause debtors cash flow problems that might see them issued with a winding-up order.

R3 president Frances Coulson explained that the altered regulations could be counterproductive.

"Although they [EAPO] were designed to make it easier to recover debts in cross-border cases, in practice the plans would give courts anywhere in the EU (European Union) power to freeze funds in UK businesses' banks accounts without warning," she said.

"R3 has been liaising closely with officials, stakeholders and MPs to highlight the negative implications of the plans. Opting out of EU regulations is a significant move."

Companies worried about their future and seeking a good insolvency practitioner (IP) might be interested to know that R3 describes them as: "a person licensed by a statutorily recognised regulatory body to act in formal insolvency proceedings.

"In the case of companies, IPs may act as administrators, receivers, liquidators or supervisors of company voluntary arrangements."