8 April 2019
The planned introduction of a Government Preference in respect of Floating Charge Assets could have a significant impact on Asset Based Lenders and their Clients / Borrowers.
The undoing of the provision of the Enterprise Act which abolished the original Crown preference position means that Lenders against Inventory will be exposed and under collateralised in Insolvency \Bankruptcy situations.
Also, where Lenders have not established a Fixed Charge Security or a True Sale over Receivables (because of not controlling the proceeds of sale / Cash Dominion) and are therefore relying on a Floating Charge Security Interest also need to be cognisant of this new legislation.
The legislation which is expected to become Law in 2020 will be retrospective which means that Lenders need to be considering their options now as historic liabilities will have a preference.
Our suggestion is to Review the Inventory and Crown Liability’s to assess the impact on their collateral and continue to monitor all Government Liabilities including VAT, PAYE Corporation and Capital Gains taxes, make appropriate reserves and address any potential Cash Flow implications.
In the meantime, various Bodies and Trade Associations are petitioning Government to think again as the impact on the UK economy is likely to significantly outweigh the amount of Tax revenues that may be recovered.
For further Information on how to prepare for this please contact:
CEO Atlantic RMS
Operations Director Atlantic RMS
Atlantic RMS is the leading provider of Cross Border ABL ABS and Trade Finance Diligence Programs