Legislation lodged for the biggest shake-up of insolvency laws for 20 years – including measures to protect businesses during the COVID pandemic – has been welcomed by the R3 trade body for the South and Thames Valley.
R3 – the insolvency and restructuring trade association – has responded after the Government put forward its Corporate Insolvency and Governance Bill to Parliament.
It includes temporary measures to prevent struggling companies which are otherwise viable from being forced into insolvency as well as permanent reforms for which R3 has been campaigning.
Garry Lee, chair of the R3’s Southern & Thames Valley Committee, said: “This Bill represents the biggest change to the UK’s insolvency and restructuring framework for almost 20 years.
“Having called for corporate insolvency reforms since 2016, we welcome the introduction of the Bill to Parliament.
“The measures contained in the Bill will support the profession’s efforts to help businesses navigate the enormous economic damage caused by the pandemic – this legislation comes not a minute too soon for businesses in the South and Thames Valley.”
Temporary provisions to help businesses navigate the impact of the coronavirus pandemic include the restriction of statutory demands and winding up petitions until June 30.
The Bill also temporarily relaxes the threat of personal liability for wrongful trading from company directors while they make their best efforts to continue to trade.
Permanent measures include a moratorium to give struggling businesses a 20 business day opportunity to consider a rescue plan, extendable to 40 days, with further extensions at the agreement of creditors or the court.
Provisions are also included in the Bill to allow struggling companies, or their creditors or members, to propose a new restructuring plan for an alternative rescue.
Lee, who is a senior manager in the recovery and restructuring services team at accountancy firm Smith and Williamson’s Southampton office, said: “The new tools will add to the options available to insolvency and restructuring professionals trying to rescue businesses, and will enhance the UK’s globally recognised insolvency and restructuring framework.
“We are also pleased our feedback on the draft proposals has been taken on board by the Government.
“Previously, for example, the moratorium would only have been open to solvent businesses, but now the legislation will enable insolvent businesses to obtain a breathing space to review their options, free from the risk that a creditor may push the company into an insolvency procedure prematurely.
“This greatly increases the number of struggling but potentially viable businesses who could benefit from a vital breathing space, and will help to repair the economic devastation caused by the pandemic.
“We appreciate that in producing this Bill, the Government has condensed a process that usually takes more than year into just a few weeks.
“The profession will therefore be keen to examine the detail of the legislation, but overall, will welcome this positive step forward.”
The Bill will be debated at Parliament and it is hoped that it will become law by the autumn.
Visit https://www.r3.org.uk/press-policy-and-research/news/more/29410/page/1// for more details about the proposals in the Bill.