INSOLVENCY

New Insolvency Reforms

On the 28th March 2020 the Government announced plans to change the UK’s Insolvency Framework and add new restructuring tools in light of the current pandemic. The reforms will grant relief to the companies who are in an unenviable position navigating the current adverse market created by COVID-19 and allow more time and options. Alok Sharma stated at the Downing Street press briefing this would allow firms, “extra time to weather the storm.” These changes include:

  • a moratorium for companies to allow them space from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure;
  • temporarily suspend wrongful trading provisions retrospectively from 1 March 2020 which ensures that directors still fulfill their duties using their best endeavors but won’t have to face the threat of personal liability should their company fall into insolvency. This grants an alleviation to those anxious directors and allows them to continue trading in the uncertain times. The existing laws relating to directors duties such as fraudulent trading and director disqualification remain in effect in order to deter director misconduct.
  • a protection of companies’ supplies to enable them to continue trading while they restructure or seek a rescue; and;
  • a new restructuring plan, which will bind creditors to that plan.

It was stated that the proposals would include key safeguards for creditors and suppliers to ensure they are paid while a solution is sought. The full details of these reforms are expected to be established when Parliament returns from recess and the UK Government have stated that that they plan to bring forward the legislation at the “earliest opportunity.” This is a welcome move from the Government and follows on from similar reforms taking place in Germany in which laws were introduced to suspend the current three week period to file winding-up petitions until late September. These alterations will allow greater flexibility for firms and allow them a strong foundation to bounce back after this crisis.

Should you reqiure any advice please contact us on 028 90 200050

 

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