The coronavirus is having a profound affect on not only individuals, be that in employment or social life, but businesses as well. Governments across the globe are implementing measures to not only protect the health and lives of their citizens but to safeguard economies in the wake of COVID-19.
The UK Government has announced they will amend the current insolvency laws, which it is hoped, will help safeguard businesses that have been adversely affected by this national crisis.
The proposed amendments:
- A temporary suspension of wrongful trading provision for company directors, which will take effect retrospectively from 1 March 2020 and last for three months. This means a director’s personal liability to the company for not taking steps to minimise loss if a company is insolvent is suspended.
- A moratorium of up to 90 days which will stop creditors from enforcing debts if the company is facing cash flow issues due to the virus.
- A new restructuring plan, which includes the ability to bind creditors to the plan.
The new measures are designed to aid a business in trading out of an insolvent situation that has arisen due to the global pandemic, without the need for a formal administration or liquidation. It is hoped that the moratorium, coupled with Government’s Job Retention Scheme, will help small businesses to stave off collapse.
The measures implemented by the Government send a strong signal to workers and small businesses alike that they will be supported during this difficult time. However, it is difficult at the moment to see the true affect, the relaxing of Insolvency rules will have on propping up small business given that at present statutory demands and bankruptcy petitions can still be lodged at court in the event payments are missed.
This blog was written by: Michael Dobson
DISCLAIMER: Please note that this post sets out the general position under the general law. It should not be acted upon in any specific circumstances without taking specific legal advice as to those circumstances. Also, it should not be relied upon, acted upon or treated as a substitute for specific advice relevant to particular circumstances. If you do require specific advice please contact us for assistance.