February 18, 2019

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Conundrum of Collective Consultation re: UK Insolvency

During the previous UK government’s tenure, in March 2015 a call for evidence was launched to understand better the employee consultation process when an employer faces insolvency, restructure or other form of company rescue (Call for Evidence on Collective Redundancy Consultation for Employers facing Insolvency).

The call for evidence sought views on the following areas:

  • the understanding of the current requirements of consultation for employees in an insolvency situation

  • the factors that facilitate and inhibit effective consultation in an insolvency context

  • the role of directors and insolvency practitioners in consulting in an insolvency context

  • how timely notification to employees is achieved in an insolvency context.

Requests for evidence closed in June 2015 – two legal firms, ten insolvency practitioners, four recognised public bodies, five trade unions and seven trade bodies were among the 28 responses received.

The responses received suggest tensions exist between insolvency law and employment law. The submissions were that such tensions:

  • impede effective consultation

  • result in a struggle to balance competing creditor demands

  • make it more difficult to preserve stakeholder value

  • impede termination/transfer of employee contracts.

Overall, respondents acknowledged the benefits of consultation and notification but suggested that the government needs to do something to address the conflicts between insolvency and employment law.

Businesses finding themselves in financial distress should seek legal advice as early as possible and be aware that BIS closely scrutinises decisions that may eventually lead to redundancies.

The full 300+ page report released by the Insolvency Service can be found here.

© Copyright 2019 Squire Patton Boggs (US) LLP

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About this Author

Paul Muscutt, legal specialist, insolvency lawyer, Squire Patton law firm
Partner

Paul Muscutt is a specialist in all aspects of contentious and non-contentious insolvency, with a focus in the banking and asset based lending sectors. Paul joined the Squire Patton Boggs Restructuring & Insolvency Practice Group in London in 2001 and has acted primarily for financial institutions, insolvency practitioners and corporate clients.

+44 20 7655 1476
Andrew Johnson, Bankruptcy Attorney, Squire Patton Boggs Law Firm
Associate

Andrew is a lawyer in the Restructuring & Insolvency practice based in the London office.  His practice focuses primarily on acting for financiers, officeholders and individuals in all aspects of insolvency, business sales and acquisitions, restructurings, asset recovery and advising secure lenders on their security. Andrew has undertaken secondments at LiveNation and Squire Patton Boggs' Hong Kong office, and is currently on secondment for a year in the Business Support Unit at Lloyds Banking Group.

+44 20 7655 1194