Emergency changes to UK insolvency law – update
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On 28 March 2020, Alok Sharma, the UK Business Secretary confirmed that the Government will be introducing new insolvency laws to reduce the burden on businesses and give them breathing space during COVID-19 outbreak.
Although full details of the new legislation are awaited in the coming days, it has been confirmed that the legislation will include:
- New rules temporarily suspending the wrongful trading provisions for company directors and thereby removing the threat of personal liability for business debts. This provision will operate retrospectively from 1 March 2020 for three months. This change is intended to “reduce the burden on business” but also give directors much needed protection, by giving them greater confidence to use their best endeavours to continue to trade during this emergency, without the threat of personal liability should their company ultimately fail.
- A temporary moratorium for companies, preventing enforcement action by creditors. This is intended to prevent businesses which are unable to meet debts due from being forced into liquidation for a period of time whilst they seek a rescue or restructure.
Legislation introducing these changes, and possibly further changes, is intended to be presented to Parliament at the earliest opportunity.
For detailed information, visit the gov.uk website.
This publication is a preliminary indication of the provisions that will be coming into force, based on the most recent announcement. Events are moving fast and information is continually being updated. We therefore recommend that you keep reviewing our website, as further details will be published by Isadore Goldman as they become available.