The UK government has announced new insolvency measures to prevent businesses unable to meet debts due to the impact of coronavirus from being forced to file for bankruptcy.
The wrongful trading law would has been suspended to protect directors during the pandemic. The move will allow directors of companies to pay staff and suppliers even if there are fears the company could become insolvent.
Changes include a temporary moratorium for businesses undergoing a restructuring process, during which time they cannot be put into administration by creditors and will continue to be able to access all raw materials.
Jonathan Geldart of the Institute of Directors said:
“Our overriding objective is to help UK companies which need to undergo a financial rescue or restructuring process to keep trading. These measures will give those firms extra time and space to weather the storm and be ready when the crisis ends, whilst ensuring creditors get the best return possible in the circumstances.”
The legislation will retrospectively apply from the beginning of March 2020.