a voluntary code of practice that will protect the industry from ‘aggressive’ behaviour by receivers.
Land Rover is to hold talks with other car makers and suppliers about proposals for a voluntary code of practice that will protect the industry from ‘aggressive’ behaviour by receivers.
The move follows the resolution of the dispute between Land Rover and the receiver of insolvent chassis supplier UPF Thompson, which threatened to halt production of the Discovery model.
The company will press the DTI to clamp down on the activities of receivers when it introduces legislation to reform corporate insolvency this year.
But the proposed bill may not go far enough, said Land Rover chief executive Bob Dover. ‘Even a voluntary code of practice would improve the situation,’ he said.Dover described the situation, in which KPMG, the administrative receiver for UPF Thompson, sought to capitalise on its status as sole chassis supplier, as ‘very unsatisfactory’. He added that, by taking on responsibility for part of UPF’s debt until a buyer could be found, Land Rover was effectively doing the receiver’s job.
KPMG had made a demand valued at £61m by a high court judge to continue chassis supplies. Land Rover secured an injunction to force KPMG to continue supplies on the previously agreed terms.
Under the agreement reached this week Land Rover will acquire some of UPF’s debt, believed to be around £16m, to secure supplies. Dover said: ‘We will ask the government, in its reform of insolvency law, to bear this case in mind.
‘If receivers continue to behave in a very aggressive way it will make life very difficult. This gun-to-head approach ignores the interests of stakeholders. It’s a very unsatisfactory situation, especially as we have now had two contradictory court rulings.’ The injunction in Land Rover’s case went against an earlier precedent in a case involving Ford and Transtec.
Dover said: ‘In this case we’ve taken debt over, a responsibility that we didn’t really want, to buy time. In a normal receivership that’s what the receiver does.’ The company is talking to GKN about the possibility of taking over the chassis supply business, and is also exploring the possibility of a management buyout.
The government is committed to reforming corporate insolvency law in an Enterprise Bill in the current session of Parliament. Its proposals will abolish administrative receivership – the process used in the UPF case, where a receiver is appointed to act on behalf of a single creditor – in all but a few exceptional cases.
Most company insolvencies will be dealt with through the more collective administration process, which protects the company from its creditors while a rescue plan can be sorted out.
The company’s directors or a creditor will be able to seek to put a company into administration. The aims of administration will be redefined to make the primary goal to return the company to viability.
Only if this is not possible will the administrator seek to realise the assets of the company for the benefit of creditors.
Meanwhile, Dover rejected suggestions that pressure from car makers on suppliers to reduce cost was partly to blame for UPF’s insolvency.
‘We’ve had a long-term partnership with UPF and tried to help them. It’s of no interest to us to drive suppliers into the ground,’ he said.