The Scottish Government has extended the eligibility criteria for Debt Arrangement Scheme (DAS) to include partnerships, trusts and small and medium-sized unincorporated businesses. It is hoped that the move will provide more flexibility and breathing space from creditors for more businesses and “prevent unnecessary business insolvency.”

The Debt Arrangement Scheme (Scotland) Amendment Regulations 2014 came into force on Thursday 11 December.

DAS is administered by the Accountant in Bankruptcy (AiB) and freezes interest, fees and charges to prevent debts from escalating while allowing those applying for a debt payment programme (DPP) under DAS to commit to repaying their debts over a period of up to five years. A debtor must seek advice and assistance from a ‘money adviser’ (someone trained to offer advice on debt management and relief options) before making an application under DAS.

It is open to the creditors to either accept or reject the DPP – they are given 21 days to respond with their acceptance or rejection of the terms. If, however, a creditor does not respond within 21 days, under the legislation they will be treated as having consented to the DPP. If any one of the creditors does not accept the terms of the DPP, the AiB will decide whether the proposal should be approved or not.

DAS is not bankruptcy, it is a Government-backed debt management tool.

If your business is in financial trouble, DAS will prevent creditors from taking action to recover payment. Repayments are made to a payments distributor (an independent company), who will then distribute money out to your creditors.

Holyrood Business Minister, Fergus Ewing MSP, said: “A thriving business sector is pivotal to the growth of the Scottish economy and these changes to the Debt Arrangement Scheme will help small businesses continue to trade and retain jobs.”

“Since AiB introduced the Debt Arrangement Scheme in 2004, thousands of people in Scotland struggling under the burden of debt have benefitted by allowing them to tackle their debts in a dignified way.”

“By extending this initiative to small and medium businesses and other eligible entities, we are ensuring the lifeblood of Scotland’s economy receives the same protection and stops otherwise sound businesses collapsing.”

DAS has indeed proved popular with individuals since its introduction. In the most recent AiB figures, it is reported that the number of personal insolvencies (including both bankruptcies and protected trust deeds) continue to fall, with quarterly figures to 30 June 2014 down by over 25% compared to the same period last year. Meanwhile, the number of DPPs approved increased by a quarter over the same period. A total of £8.6 million was repaid through DAS in the first quarter of the 2014-15 financial year.

It remains to be seen whether DAS will prove similarly popular and effective for small businesses.