New measures have been announced by the UK government to help prevent businesses who are unable to meet debts as a result of the COVID-19 pandemic These measures are an attempt to help business owners from having to file for bankruptcy and putting their companies into liquidation.
The new rules will allow companies undergoing restructuring to continue to get access to supplies and raw materials. Creditors will not be able to put businesses into administration during the pandemic.
A further move will see the wrongful trading law suspended for a short period of time. Allowing directors the freedom to pay staff and suppliers even if there are fears the company could become insolvent. It will also remove the threat of personal liability during the pandemic, these measures will apply retrospectively from March 1.
The wrongful trading law, which was introduced in 1986 makes it an offence for company directors to continue to trade if they know the business will be unable to avoid going into liquidation.
Alok Sharma, The UK business secretary who announced the changes said. “These measures will give those firms extra time and space to weather the storm and be ready when the crisis ends, while ensuring creditors get the best return possible in the circumstances”.