The government the Corporate Governance and Insolvency Bill in Parliament, which will put in place a series of measures to amend insolvency and company law to support business to address the challenges resulting from the impact of coronavirus (COVID-19).
The Bill consists of 6 insolvency measures and 2 corporate governance measures.
The insolvency measures will provide vital support to businesses to help them through this period of instability.
Business Secretary Alok Sharma said:
This is a particularly challenging time for businesses right across the UK, and we are doing all we can to support them through this period.
Our proposals have been widely welcomed by business groups. The Bill will help companies that were trading successfully before the COVID-19 emergency to protect jobs and put them in the best possible position to bounce back.
The corporate governance measures will introduce temporary easements and flexibility to businesses where they are coping with reduced resources and restrictions.
This Bill will do this through:
- introducing a new moratorium to give companies breathing space from their creditors while they seek a rescue
- prohibit termination clauses that engage on insolvency, preventing suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process
- introducing a new restructuring plan that will bind creditors to it
- enabling the insolvency regime to flex to meet the demands of the emergency
- temporarily removing the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the emergency
- temporarily prohibiting creditors from filing statutory demands and winding up petitions for coronavirus related debts
- temporarily easing burdens on businesses by enabling them to hold closed Annual General Meetings (AGMs), conduct business and communicate with members electronically, and by extending filing deadlines
- allowing for the temporary measures to be retrospective so as to be as effective as possible
Insolvency Bill provides respite for tenants
Commenting on the presentation of the bill UKHospitality Chief Executive Kate Nicholls said: “This is a very important piece of legislation from the Government and something for which UKH has been pushing. The Bill should provide businesses with some very welcome respite from aggressive landlords and valuable breathing space to restructure their businesses. It is very encouraging to see the Government listening to the concerns of tenants and landlords, and acting decisively on what is a complex issue.
“It should give some impetus for bringing landlords to the table to understand the pressures that tenants are facing. The majority of landlords have been cooperative but a minority have aggressively pursued hospitality businesses that are moth-balled, have no revenue and cannot hope to pay. It is also positive to see protection extended to landlords to ensure they are not obliged to pursue tenants.
“Extension of the moratorium would allow more time for businesses and Government to get to grips with the scale of the crisis so we can begin to work out long-term solutions to protect local communities. Measures in the bill will provide more breathing space to deliver rent solutions with lower rent liabilities through mandated agreements.”
The Bill introduces a moratorium on the use of statutory demands made between 1 March 2020 and 30 June 2020 and winding up petitions presented from 27 April 2020 through to 30 June where a company cannot pay bills due to COVID-19.