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EACTP calls for new pre-insolvency moratorium to be introduced in the UK

Directors of the European Association of Certified Turnaround Professionals (EACTP) have called for a formal pre-insolvency moratorium to be introduced in the UK to help companies in distress.

EACTP President Tyrone Courtman and Education and Training Committee Chair Alan Tilley advocated this change as part of the association's response to consultation by The Insolvency Service on European Commission recommendations for a new approach to business failure and insolvency.

The objective of the recommendation announced last March was to encourage Member States to put in place a framework that enables the efficient restructuring of viable enterprises in financial difficulty” and to “give honest entrepreneurs a second chance”.  It sets out minimum standards for how it suggests this could be achieved, which would lower the cost of assessing the risks of investing in another Member State, improve recovery rates for creditors and remove the difficulties in restructuring cross border groups of companies.

Through its consultation, which has now closed, the Government asked industry experts to consider whether implementation of the minimum standards in the recommendation would have the effect the Commission desires, and how the UK currently compares against the minimum standards set out.

In the EACTP's response to this consultation Mr Courtman and Mr Tilley suggested that a formal pre-insolvency moratorium would give companies in the zone of insolvency the chance to themselves originate a restructuring solution. They said this ought to be secured with an obligation on lenders and its creditors not to seize the opportunity to improve each of their own positions.

Mr Courtman, who wrote to all EACTP's UK members and other turnaround colleagues to highlight the consultation, said: "Such a moratorium would offer a distressed company the chance to restructure without having to alert other stakeholders and competitors that it is in difficulties as is the case with a CVA, which inevitably destroys much of its enterprise value by eroding the good will of its customers, employees and creditors."

Mr Tilley added: "In order to ensure this process is not abused, we recommended it would need to be mandatorily monitored by a suitably qualified professional who is not an Insolvency Practitioner or acting as an Insolvency Practitioner, for example an accountant with experience of restructuring.

"We also highlighted the role that Certified Turnaround Professionals, who have met our programme’s rigorous standards and have the requisite credentials for any turnaround or restructuring engagement, could play in the monitoring of such a pre-insolvency moratorium."

The EACTP is an independent organisation which has established the first accreditation programme for all turnaround professionals across the continent to provide an industry standard of quality in the practice of turnaround and restructuring. It does this by delivering a respected pan-European certification scheme based on the Turnaround Management Association (TMA) Global Certified Turnaround Professional (CTP) programme.

Leading turnaround professionals from across Europe sit on the EACTP’s board and committees to set strict admission criteria and oversee the stringent certification process. This ensures only those practitioners able to demonstrate relevant academic qualifications, skills, experience at a significant and substantive level, and continuing practice are entitled to become and remain members.

From next year all applicants will also need to pass professional examinations in addition to demonstrating their turnaround experience.

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