Businesses struggling due to the current coronavirus pandemic are set to be offered a substantial lifeline with one of the largest shake-ups of insolvency laws in nearly 20 years.
According to insolvency and restructuring trade body R3 in Wales, the Corporate Insolvency and Governance Bill, which was debated in the House of Commons last week, is a significant step forward in attempts to mitigate the enormous economic damage caused by COVID-19.
R3 in Wales Chair Philip Winterborne, a partner at Temple Bright Solicitors, said:
“The measures contained in the Bill come not a minute too soon and will add to the options available to insolvency and restructuring professionals trying to rescue businesses.”
The new Bill, which is set to be expedited through the Parliamentary approval process, could become law as early as this month. It introduces a moratorium which will give struggling companies a 20-business day opportunity to consider a rescue plan, extendable by the directors for a further 20 business days or with creditor consent up to a year.
Further proposed measures include temporary changes to wrongful trading provisions. Statutory demands from creditors and winding up petitions against companies struggling financially due to the coronavirus could also be suspended.
Philip Winterborne continued:
“The proposed legislation will give businesses crucial breathing space and increased legislative flexibility to review options without being pushed prematurely into an insolvency procedure. This new approach could make a significant contribution to repairing the economic devastation caused by the current pandemic.”
“R3 appreciates that in producing this Bill, the Government has condensed a process which usually takes more than year into just a few weeks. The insolvency and restructuring profession will therefore be keen to examine the detail of the legislation but, overall, we welcome this positive step forward.”