News In Focus
Executive mistake in protected trust deeds
A basic arithmetical error has undermined the Scottish Executive's proposals on the reform of protected trust deeds, according to a leading insolvency practitioner.
The Executive wants to set a minimum dividend payment of up to 30p in the pound before debtors can sign a protected trust deed (PTD), an alternative to sequestration. Since 2000, dividends from PTDs on average have exceeded the 18.4p the Executive claims as the average from sequestrations: hence the suggestion of a minimum of at least 20p to permit a PTD.
However, according David Hill, head of business recovery at BDO Stoy Hayward, of the 3,688 sequestrations in 2005, 3,152 paid no dividend at all. Of those that did, the average payout was only 6.3p in the pound. Mr Hill says the Accountant in Bankruptcy has now acknowledged the mistake to him.
Mr Hill believes that this "fundamental arithmetical error" requires the whole proposal to be withdrawn and rethought. His view has the support of the Institute of Chartered Accountants in Scotland, who say the PTDs were easily the most popular procedure for collecting debt last year among both creditors and debtors, and people should not be forced into a more expensive procedure with extra costs for the taxpayer.
The Executive's plans are not due to be implemented until the bill on bankruptcy now before the Scottish Parliament has become law.