New rules on corporate insolvency came into force in September. The changes, contained in the Enterprise Act 2002, abolished the Crown's preferential claim - benefiting unsecured creditors, many of whom are small businesses.
The changes include:
• Making administration more efficient and effective - by introducing routes into administration without court orders for floating charge holders, companies and their directors, removing bureaucracy and providing clear time limits. This will help the rescue of viable companies and achieve better results for the creditors of companies that cannot be saved.
• Inland Revenue and Customs are to give up their preferential rights to recover unpaid taxes ahead of unsecured creditors. In companies with floating charges created on or after 15 September 2003, a prescribed part of the funds available to the holders of such charges (typically banks) will be set aside for the benefit of the unsecured creditors, many of whom are small firms. In all other cases the benefit of the abolition will flow automatically to unsecured creditors.