Following a consultation on the issues last year, an Order was laid before the UK Parliament on Monday (9 February 2015) to prevent suppliers of water, gas, electricity, communications services and IT from cutting off supply or charging premium rates while insolvency practitioners seek a viable solution to rescue a business.
The new rules were designed to assist insolvency practitioners to save viable businesses and are expected to come into force for any supply contracts for essential services made after 1 October 2015.
Various measures are proposed to safeguard the affected suppliers: (i) they will be able to seek a personal guarantee from the insolvency practitioner, (ii) they will be permitted to apply to Court to terminate their contract on the grounds of hardship; and (iii) they will be guaranteed payment ahead of any other suppliers owed money for services supplied during the rescue period.
This area has been due an overhaul since the protection offered to insolvent companies by the existing legislation (the Insolvency Act 1986) was diminished due to the deregulation of the utility sector leaving many suppliers outside the scope of the legislation. As well as tightening up this loophole, the new rules also include IT suppliers, reflecting the essential role that this sector now plays in the effective running of a business.