Changes to UK Insolvency Laws
Key contact: Christian Farrow
Author: Chris Doherty
The Government has proposed emergency changes to the UK insolvency laws which will offer additional protection to businesses in financial distress as a result of the Coronavirus outbreak.
A “temporary moratorium” will be available for businesses unable to meet their debts due to the impact of the Coronavirus. This will protect them from being put into administration by their creditors, and allow them to continue to trade and purchase supplies and raw materials whilst seeking a financial rescue or restructure. This will provide extra time and space for companies to access and utilise the other support packages being made available by the Government, full details of which can be found here.
Wrongful trading provisions for company directors will also be temporarily suspended to give directors greater confidence to continue to trade during the crisis, without the threat of personal liability should the company ultimately fall into insolvency. This relaxation will enable directors to, for example, continue to pay employee salaries or suppliers, even where there is a possibility that the company will become insolvent .
The Coronavirus has placed an unprecedented strain on UK businesses, with many seeing their income-stream wiped out almost overnight. The new measures will provide much-needed flexibility within the insolvency and restructuring framework to protect against the collapse of companies in financial distress and the mass insolvency of otherwise viable businesses.
The proposed measures will operate retrospectively from 1 March 2020 and are due to be introduced at the earliest opportunity. The exact details of how the changes will operate are yet to be confirmed, and consideration will need to be given to the interests of creditors.
Acuity Law will provide a full analysis of the revised rules once details have been confirmed. We can also provide tailored legal advice on the insolvency rules to businesses and directors.
Please get in touch with our restructuring team who will be able to talk you through the options available to you.
