Ed Milliband, erstwhile leader of the Labour party and the unfavoured son of his parents, once said, "Look, there is a sort of old view about class which is a very simplistic view that we have got the working class, the middle class and the upper class, I think it is more complicated than that", and the recently reinvigorated Shadow Secretary of State for Energy and Climate Change, introduced amendments to the Governance Bill on Thursday 4 June, including proposed changes to the prescribed part.
He responded to concerns that an amendment to the prescribed part would limit access to borrowing as it limits the value of security, but it is claimed that he missed the point. His view appears to be supporting unsecured creditors with a larger prescribed part, while preferential creditor status for HMRC remains in the Finance Bill (for now, at least - will this happen in December? Bookies now back in virtual business at race courses throughout Britain are opening a book ...). The secured creditor will be more cautious, especially when in a new moratorium the floating charge cannot be crystallised. Mr Milliband took the view this might provide a better return to unsecured creditors, but it risks limiting loans for working capital and enhances risks of cashflow insolvency.
He described the amendment, "There is currently a provision for 20%, but up to a limit of £800,000. Our amendment seeks to make that 30%, and to raise the proportion, but remove the limit". In section 176A of the Insolvency Act 1986 the proposal is to amend as follows:
After subsection (2), insert:
“(2A) The prescribed part of the company’s net property available for the satisfaction of unsecured debts shall not be less than 30 per cent.”
But will this affect existing existing floating charges, or only new ones. Watch this space.