New insolvency tools and moratorium
In addition to our earlier regarding the relaxing of the rules regarding wrongful trading from 1st March, the UK’s Insolvency Framework will be changed to include:
- A moratorium for companies giving them breathing space from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure;
- Protection of their supplies to enable them to continue trading during the moratorium; and
- A new restructuring plan, binding creditors to that plan
The proposals will include key safeguards for creditors and suppliers to ensure they are paid while a solution is sought.
The new legislation fast tracks proposed plans to change UK Insolvency Laws that were consulted on in 2018.
At present, a company or the company’s director can only acquire the protection provided by a moratorium when filing a notice of intention to appoint administrators. That moratorium lasts for 10 business days.
When first tabled, the proposed new moratorium was to last for up to three months. That was later reduced to 28 days, but in current circumstances, it is understand that this could again be extended to 90 days, thus giving a business the requisite protection from creditor enforcement or other action, potentially enabling it trade successfully through the Covid-19 crisis.
However, given that Parliament is in recess, these changes are unlikely to available until after Easter.
Source: Restructuring GlobalView
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