BCC & R3 Responds To Changes To Insolvency Laws

Commenting on Business Secretary Alok Sharma’s announcement on the relaxation of the insolvency rules, 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.”

Also announced were measures to cut red tape to allow companies to produce Personal Protective Equipment (PPE) and hand sanitiser more quickly. BCC Co-Executive Director Hannah Essex said:

“Businesses across the UK will welcome measures that help them contribute to the national effort to tackle Coronavirus. Action to speed up the production of these supplies will be vital to limiting the spread of the virus and reducing the burden on our health service.

“Chambers and their members are working together to see how they can play their part, including gathering unused PPE equipment from local businesses and delivering them to the NHS.”

Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire said:
“The UK has a world-leading insolvency and restructuring framework, and the new restructuring tools in this package give our profession more options to help businesses navigate COVID-19 disruption. We’re pleased Government has listened to the profession’s feedback and is focused on making these tools accessible for the businesses that need them.

“The details of how exactly these tools will work are still to be fleshed out, but we’re hopeful that the Government will address many of the concerns the profession has expressed about the reforms since they were first announced in 2016. The moratorium, for example, will not be useful if it can’t be accessed by insolvent companies. It’s important that, as the Government works on the details, it listens to creditors – including lenders, the wider business community, and landlords – on how they will be affected by the moratorium.

“Until the tools are introduced, the profession will continue to use the wide range of tools it has at its disposal to help restructure businesses and rescue jobs.

“The profession will, however, have some serious concerns about the Government’s plans to suspend wrongful trading. A blanket suspension could risk abuse. The provisions are there for a reason and protect creditors. We do understand that directors may be worried about the consequences of continuing to trade amid the COVID-19 disruption if they’re missing debt payments, but good advice from an insolvency practitioner or insolvency lawyer will remove their risk of facing a wrongful trading action.”