Under the Corporate Insolvency and Governance Bill, UK companies will be given access to tools to help them restructure their debt and keep operating through the crisis. It’s hoped that the bill, which was presented to Parliament earlier today (20 May), will protect otherwise viable companies from collapse. MPs will next consider all stages of the Bill on Wednesday 3 June 2020. Due to lockdown this bill will be expedited through parliament and will receive Royal Assent to become law.
The Bill consists of 6 insolvency measures and 2 corporate governance measures. The insolvency measures will provide vital support to businesses to help them through this period of instability.
What’s in the bill?
- There will be a moratorium period to allow companies to seek a rescue
- Creditors will have to accept payments through the rescue period
- Creditors will be bound to a new restructuring plan
- As within the Coronavirus Act, this bill temporarily remove the threat of personal liability for wrongful trading from directors who try to keep their company afloat
- Temporarily prohibiting creditors from filing Statutory Demands and Winding Up Petitions for coronavirus related debts
- A creditor cannot use any termination clauses that engages in insolvency, preventing suppliers from ceasing their supply
- Extending deadlines -i.e. Companies House & HMRC
Will this work?
This is an important step to help and assist small businesses during this pandemic. However, this puts massive restrictions on creditors i.e. landlords who have been out of pocket for months in relation to renting, insurance, service charges etc. One of the major introduction under this bill is that the creditor cannot use any termination clauses that engage in insolvency, preventing suppliers from ceasing their supply.
Will some creditors go out of business due to non-payment?