Covid-19 coronavirus: saving livelihoods and keeping UK businesses going
30 March 2020
- Wrongful trading: there will be a temporary suspension of wrongful trading provisions for company directors, applied retrospectively from 1 March 2020.
- Changes to corporate insolvency law: In 2018, the UK government announced plans to introduce new restructuring procedures including (a) a short moratorium that will give companies a breathing space from creditor action to explore options for rescue; (b) a new restructuring plan based on the scheme of arrangement with the ability to cram down a dissenting class of creditors; and (c) provisions preventing creditors from relying on contractual termination clauses as a result of insolvency proceedings. In the recent press statement, the UK government announced that it would be advancing these proposals.
In a welcome announcement in response to the UK's Covid-19 crisis, a government spokesperson confirmed on 28 March 2020 that there would be a temporary suspension of the wrongful trading provisions and an acceleration of amendments to insolvency laws that were proposed in 2018 to provide greater protection to companies in financial difficulty. We await the finer details of these proposals, which should not be expected before Parliament reconvenes on 21 April 2020 at the earliest, but we understand that the suspension of the wrongful trading provisions will apply retrospectively from 1 March 2020.
The government has also indicated an intention to bring forward legislation that would allow companies greater flexibility with regard to their annual general meetings, allowing these to be held online or postponing them.
In this publication, we analyse the government’s announcement and highlight the key issues for businesses and insolvency practitioners: