More flexible insolvency rules to help businesses affected by the coronavirus
Under new insolvency rules announced by Business Secretary Alok Sharma, businesses will be allowed greater flexibility throughout the coronavirus crisis to continue trading. The measures are designed to give the affected company breathing space, whilst ensuring creditors get the best returns but the company still has access to supplies and materials.
During the moratorium, the key measures are:
- A temporary suspension of wrongful trading provisions without the threat of personal liability should the company end up insolvent
- Proposals to protect creditors & suppliers to ensure they are paid, including protecting the supplies enabling trade to continue
- A new restructuring plan agreed on by the creditors
- Breathing space from creditors enforcing their debts whilst the company looks to restructure or undergo rescue
- Greater flexibility over holding AGMs during the affected period
We welcome these measures which are designed to give businesses the best chance of survival during the coronavirus crisis and in a position to ‘bounce back’ once the worst of the pandemic is behind them. Directors are being encouraged to be resourceful, enterprising and consider new options for staying afloat which under normal circumstances would be caught by these provisions. The temporary suspension will apply retrospectively from 1 March 2020.
Mr Sharma was clear to reassure us:
“However, to be clear, all of the other checks and balances that help to ensure directors fulfil their duties properly will remain in force.”
Businesses which were due to hold AGMs are able to hold these in a manner that is compatible with public health guidance, most likely online and using the phone for proxy voting.
We are here to offer you business advice during the coronavirus pandemic and can help with your insolvency questions.