Failing firms' IT supply to be protected

IT resellers will be prevented from cutting off supply to insolvent customers under proposals laid out in Parliament today

The government is ploughing on with plans to force IT suppliers to continue providing services to customers that have entered administration.

Under proposals laid out in Parliament today, suppliers of IT - as well as other services deemed essential such as water, gas, electricity and communications - will be prevented from cutting off supply or charging premium rates to failing but viable businesses while they are being rescued. This follows a consultation on the topic.

Business minister Jo Swinson said the proposals would help save jobs and improve the likelihood that creditors will be paid.

"Continued IT and energy supplies are needed for businesses to continue trading while options are sought about their future," she said.

Under safeguards built into the scheme, suppliers will be able to seek a personal guarantee from the insolvency practitioner to give them more certainty that they will be paid, Swinson (pictured) said. They can also apply to the court to terminate their contract on the grounds of hardship.

Giles Frampton, president of R3, a body for insolvency practitioners, said the proposals will make it easier for his profession to save businesses and jobs and return money to creditors.

"Changes to the terms of supply for insolvent businesses place unnecessary hurdles in the way of business rescue," he said. "Without reliable and affordable IT and energy supply, attempts to save a business can be stymied quickly."

Venon Dennis, head of restructuring at law firm HowardKennedyFSI, said the government received only 31 responses during its consultation, only two of which were from IT suppliers.

"The government has therefore concluded that the suppliers are broadly supportive. But I wonder if the impact has truly been considered by the industry," he said, adding that the new rules are set to apply to contracts after 1 October 2015.