The government has announced plans to relax insolvency rules to protect businesses hit by the Coronavirus crisis.
The aim is to prevent businesses who can’t pay their debts from having to file for Administration/Company Voluntary Arrangement or Winding Up.
Under the plans, new restructuring tools will be added to the UK’s Insolvency Framework including:
- a moratorium for companies giving them breathing space from creditors enforcing their debts for a period of time while they seek a rescue or restructure;
- protection of their supplies to enable them to continue trading during the moratorium and;
- a new restructuring plan, binding creditors to that plan.
The proposals will include key safeguards for creditors and suppliers to ensure they are paid while a solution is sought.
The government will also temporarily suspend the wrongful trading provisions to allow directors of companies to pay staff and suppliers without the threat of personal liability should the company ultimately fall into insolvency.
Existing laws for fraudulent trading and the threat of director disqualification will continue to act as an effective deterrent against director misconduct.