Coronavirus – relaxation of insolvency rules
New insolvency measures have been announced to help prevent businesses unable to meet debts, due to the impact of Coronavirus, to continue trading and not be forced to file for bankruptcy. The measures were announced by the Business Secretary, Alok Sharma.
These changes will see the temporary suspension of the wrongful trading law during the pandemic. It will apply retrospectively, from 1 March 2020, for three months. This means that company directors can continue to trade without the threat of personal liability. This will allow directors of companies to pay staff and suppliers even if there are fears that the company could become insolvent due to the current, exceptional trading circumstances.
Other changes include a temporary moratorium for businesses undergoing a rescue or restructuring process. During this period, they cannot be placed in administration by creditors and be able to continue buying important supplies - such as energy costs and raw materials. There will also be a new restructuring plan binding on creditors.
These measures should help some businesses to cope with the significant difficulties of the current crisis and hopefully, enable them to continue functioning until the situation improves.