On 28 March the Government announced that we could expect a package of reforms to the laws that govern insolvency. A package that would ease the pressure on businesses affected by COVID-19 and promote restructuring processes.
With new legislation likely to be necessary (as opposed to non-legislative guidelines), and parliament in recess until 21 April, it could be a while longer before we know the details.
For those wishing to get an idea of what to expect, the Government indicated that the package would be based on proposals from 2018; alongside a new temporary suspension of wrongful trading provisions (from 1 March 2020, for three months).
In his article for Business West, Restructuring and Insolvency partner Mark Cullingford looks at the 2018 proposals in detail- assessing what is likely to stay and what is likely to change.
The three main limbs of the 2018 Insolvency and Corporate Governance proposals are:
- A power to seek a “moratorium” (suspending rights of enforcement) against a company that had been viable before the COVID-19 disruption
- A new process focussed around a Restructuring Plan, monitored by a licenced insolvency practitioner, while company directors remain in operational control
- A suspension of a right to terminate contracts solely on the grounds of insolvency, while the Restructuring Plan is advanced in pursuit of a rescue.
You can read the article in full here, on Business West’s website.
In the meantime, existing processes are being used to enable the rescue of companies and their business. Only today, as Debenhams confirms it will file for administration, the focus is on protecting jobs, reopening and resuming trade as soon as possible, and from as many stores as feasible when government restrictions are lifted.
To seek legal assistance for your business at this critical time, please contact a member of our Restructuring and Insolvency team or email them on BusinessSupport@thrings.com.
