The chancellor Gordon Brown has unveiled proposals to modernise insolvency laws and remove the Crowns preferential right to recover unpaid taxes ahead of other creditors.


Brown also proposed draconian measures to jail company directors found guilty of price fixing under a government initiative to promote enterprise.


Administrative receivership, which currently allows a single creditor to control a firms administration, could be reformed to include collective creditor procedures.


A Treasury spokesman said: "The rationale is to make the receiver act on the behalf, and for the benefit, of all creditors, not just one."


But ICSM partner Steve Mepham said that if not thought through, the proposals could "weaken the debenture system. Will banks be as willing to lend without the guarantees provided by debentures? The collective procedures could slow the process. How will they be implemented?"


The Treasury spokesman said that the exact details had yet to be decided.


"Its about promoting a truly entrepreneurial culture in Britain," he added.


Brown also revealed measures to improve the chances of small businesses, including the extension of the 10% corporation tax band, and removal of automatic fines for the late payment of VAT for firms with 100,000 or less turnover.


Story by John Davies