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An all-party Commons committee has called for the urgent revision of insolvency
legislation as it applies to co-operatives in the wake of the collapse of Dairy
Farmers of Britain, the farmers milk marketing organisation.
The Environment, Food and Rural Affairs Committee said the affair showed
existing rules were not fit for purpose and the legislation needs to be updated.
Chairman Michael Jack explained: "Dairy Farmers of Britain did not go to the
wall because it was a co-operative, but the demise of the business and the
challenges faced by the receiver have highlighted a number of significant
weaknesses in the relevant legislation."
The committee was told by PricewaterhouseCoopers (PwC) that difficulties had
arisen because of Dairy Farmers of Britain's status as an industrial and
provident society, which meant it was outside the provisions of the Insolvency
Act 1986 and Enterprise Act 2002.
It had to go to court to clarify its position concerning communication with
creditors and told the committee that at a time when to maintain stability in an
insolvency it was necessary to move very quickly, the delay going to court "was
not helpful".
The report said there was no statutory obligation on PwC to conduct the
insolvency according to the standards that apply to limited companies but it had
followed "best practice" in spite of this.
There were also concerns about whether a pension fund was covered by the Pension
Protection Fund.
In all, 1,800 farmer members suffered substantial financial losses.
Source:
RedAlert
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