Government reshapes insolvency laws due to coronavirus outbreak
Insolvency laws in the UK are to be adapted to allow struggling businesses to “weather the storm” during the coronavirus crisis, the Business Secretary has announced.
Alok Sharma revealed changes to bankruptcy rules in efforts to allow firms to continue trading and “emerge intact the other side of the Covid-19 pandemic”.
He told a Downing Street briefing that changes to the insolvency regime will include new rules that allow companies undergoing restructuring to continue to gain access to supplies and raw materials.
There will also be a temporary suspension of wrongful trading provisions for company directors, removing the threat of personal liability during the pandemic.
This will apply retrospectively from March 1.
“Our overriding objective is to help UK companies which need to undergo a financial rescue or restructuring process to keep trading,” he said.
“These measures will give those firms extra time and space to weather the storm and be ready when the crisis ends, whilst ensuring creditors get the best return possible in the circumstances.”
Mr Sharma told the briefing on Saturday that legislation in these areas will be brought forward at the “earliest opportunity”.
He added: “However, to be clear, all of the other checks and balances that help to ensure directors fulfil their duties properly will remain in force.”
Responding to the announcement, Suren Thiru, head of economics at the British Chamber of Commerce, said: “Companies that were viable before the outbreak must be supported to ensure they can help power the recovery when the immediate crisis is over.
“Cashflow remains an urgent concern for many businesses, so it’s vital that Government support packages reach businesses and people on the ground as soon as possible.”
In addition, companies required to hold annual general meetings will be be able to do so flexibly in a matter compatible with public health guidance.
Mr Sharma said: “This might include postponing or holding the AGM online, or by phone using only proxy voting.”