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”.
Adjustments to the insolvency regime will include new rules that allow companies to continue buying supplies, such as energy, raw materials or broadband, while attempting a rescue.
Mr Sharma told a Downing Street briefing 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 for three months.
“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.”
Matthew Fell, chief UK policy director at the Confederation of British Industry, welcomed the interventions at a “critical time” for businesses.
He said: “The temporary suspension of wrongful trading provisions, along with other measures, will give much needed headroom for company directors to enable otherwise viable businesses to use the Government’s support package and weather this crisis.”
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.”