The government is to “relax” insolvency regulation to give firms more protection during the coronavirus crisis.
Legislation will be introduced soon to give businesses “extra space and time to weather the storm”, said business secretary Alok Sharma at the government’s daily briefing on Saturday. He said: “I want to announce more measures which are designed to give businesses greater flexibility as they face the current crisis, to help them emerge in tact the other side of the Covid-19 pandemic”
The new rules will allow companies undergoing restructuring to maintain access to supplies and raw materials. There will also be a temporary suspension of wrongful trading provisions for company directors to remove the threat of personal liability during the pandemic, which will apply retrospectively from March 1.
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.’
BCC Head of Economics Suren Thiru said: “Businesses will welcome the government’s sensible steps to amend insolvency laws to help protect companies weakened by the impact of coronavirus. “It is right that the rules on wrongful trading are temporarily suspended to ensure that directors are not penalised for doing all they can to save companies and jobs during this turbulent period.
“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.”