Proposed changes to insolvency law

In one of the Government’s recent briefings, Business Secretary, Alok Sharma, announced that he would be making changes to enable UK companies undergoing a rescue or restructure process to continue trading, by giving them the breathing space they need to help them avoid insolvency.

It is understood that the main areas of change will include legislation to:

  • add new restricting ‘tools’ including 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 and the introduction of a new restructuring plan, binding creditors to that plan;
  • enable companies to continue buying much-needed supplies, such as energy, raw materials or broadband, while attempting a rescue or restructure such as those noted above under the new legislation; and
  • temporarily suspend wrongful trading provisions retrospectively from 1 March 2020 for three months for company directors so they can keep their businesses going without the threat of personal liability.

Under current insolvency law, directors of limited liability companies can become personally liable for debts of that company if they continue to trade at a time when they knew or ought to have concluded that there was no reasonable prospect that the company would avoid insolvency.

The relaxation of these laws is aimed at reassuring directors that the difficult decisions they have to make about the future viability of their business will not have to be unduly influenced by the exceptional circumstances which are entirely beyond their control.

It is anticipated that existing and remaining laws about fraudulent trading and the threat of director disqualification will be an effective deterrent against director misconduct and “flouting” of the proposed change.

For more information please get in touch with our team of Insolvency specialists on or call 0117 945 2500.

Posted in Left, Newswire.