Government to relax insolvency rules for struggling companies

Under the plans, the UK’s Insolvency Framework will add new restructuring tools including:

• A moratorium for companies giving them breathing space for from creditors enforcing their debts for a period of time whilst 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 give company directors greater confidence to use their best endeavours to continue to trade during this pandemic emergency, 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.

Source: – April 2020

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