COVID-19: Relaxation of financial insolvency rules
Apr 14, 2020
In a bid to help prevent the mass failure of UK companies due to coronavirus, the Government has announced the introduction of emergency measures to overhaul insolvency laws.
Laws that make it illegal for a business to trade when it is insolvent are set to be suspended. The decision means companies and individuals that cannot meet their debts because of the coronavirus pandemic will not be forced to file for insolvency.
Current insolvency rules make it a civil offense for directors of limited liability companies to continue to trade when they are not certain that their businesses can continue to meet their debts, with directors becoming personally liable.
Amendments to wrongful trading rules will protect directors during the pandemic by allowing companies to continue buying supplies, such as energy, raw materials or broadband, while they attempt a rescue, the Government has said.
The suspension has been put in place retrospectively from 1 March 2020 for three months.
Meanwhile, the rules concerning Annual General Meetings have also been relaxed. As meetings can no longer take place in person, they can either be adjourned or take place via video conference.
These temporary practical measures are designed to ease the pressure a little on company directors at this very stressful time. However if you have any concerns about your business we encourage you to please get in touch so we can offer you the advice and support you need.