Sir, John Willman sets out arguments for and against the concept of a Chapter 11-style bankruptcy regime for the UK (“Tide of distress will put salvage system to its toughest test”, July 21) and rightly concludes that the current system is likely to be tested to breaking point in the coming months. And while Tom Brown (Letters, “Chapter 11 proposals unlikely to save more companies or jobs”, July 18) seems to be an experienced operator, his opposition to the Conservatives' initiative in this area is evidenced by examples from another era in terms of restructurings and turnrounds.

Capital structures have become very much more complex and the current Enterprise Act does not allow for a venue to conduct a valuation fight. Nor does it provide for a stay or freezing of past debts to allow a company breathing room to prepare a turnround plan or address core issues. It also does not have a mechanism for super-priority new money to come in for rescue financing.

The Enterprise Act works if more than 75 per cent of the creditors agree and do a scheme or pre-packaged restructuring.

But with the growth in complex financial instruments, more companies will fail and more jobs will be lost than in the prior wave of restructurings. Having been involved across Europe during the past downturn (in both in-court and out-of-court rescues), I have to say that whatever your politics, British and indeed European lawmakers need to move faster if they are genuinely to support the growth opportunities of their entrepreneurs in the increasingly competitive reality of global business.

The UK has become a financial centre of excellence that has greatly contributed to both the UK economy and Europe generally. But if its insolvency regime proves ineffective in the next downturn, which is obviously looming, then it will deter investors who seek greater predictability.



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