Throughout the pandemic, UK businesses have shown that necessity truly is the mother of invention.
Diversification has been key for the self-employed, sole traders and director/owners, as many haven’t been fortunate enough to take any kind of furlough. Other types of support have been tough to get hold of, or non-existent, and so a raft of new changes to insolvency laws will be met with approval by many…
Proposed changes to the Corporate Insolvency and Governance Bill are geared towards giving business owners the space, time and opportunity to make the necessary adjustments that would improve their prospects of coming through the crisis in as good a condition as possible.
The Business Secretary, Alok Sharma, has outlined the following proposed changes:
Any business that is likely to become insolvent would have the ability to apply for a 20 day business moratorium, expandable to 40 days on agreement with creditors or the courts. This extra period would allow for continued trading, under the guidance of insolvency practitioners, and prevent landlords from processing evictions within the moratorium.
Prohibit Termination Clauses
Suppliers would be prevented from using clauses that would allow them to stop supplying struggling businesses. Suppliers might not necessarily approve of this measure, but for business owners on the brink, this could be the thing that stops them from going over the edge.
New Restructuring Tool
Creditors and Members would be presented with a restructuring proposal, and any such model would be a binding plan between businesses and their supporting parties.
Removal of Threat of Personal Liability
Business owners may want to go down with the ship, by putting everything they have behind the survival process, but the proposed changes to the Bill would see a temporary suspension of the threat of personal liability for wrongful trading. An ‘all or nothing’ approach, with the high stakes supported by the Government’s tweaks to the Bill.
Extension of Deadlines
This change to the Bill would do exactly what it says on the tin.
More time + more space = more chance of survival?
With changes like the ones proposed, it is clear that the Government want as many businesses as possible to survive, even by the skin of their teeth.
Do the changes go far enough?
Plenty of businesses will still fall through the net, but these measures would close up the holes.
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