U.K. Introduces Insolvency Bill to Help Covid-Hit Companies

(Bloomberg) -- The U.K. government has introduced new insolvency legislation to help businesses that are struggling from the economic impacts of coronavirus.

The new Corporate Insolvency and Governance Bill will create more opportunities to save companies in difficulty and offer better protection from creditors during the pandemic, according to a statement Wednesday. Under the bill, U.K. companies will have access to new tools to restructure their debt in order to keep operating through the crisis.

The measures follow calls from some of the world’s largest accounting firms for more initiatives to help U.K. businesses damaged by the actions taken to stem the virus. KPMG, Deloitte and others have pushed for a short-term softening in insolvency legislation.

“This will be the biggest reform of the U.K.’s restructuring and insolvency framework in more than 15 years,” said Olga Galazoula, restructuring and special situations partner at law firm Ashurst in London. The measures are welcome but “the jury is still out - and will be for some time - on how widely they will be used in the current environment.”

The rules temporarily suspend wrongful trading provisions, allowing companies to keep operating without the threat of personal liability to directors. They also suspend the use of written warnings from creditors and winding up petitions against companies that are unable to pay their debts due to the impact of the coronavirus crisis. The goal is to protect “otherwise viable companies” from collapse.

In addition, the rules temporarily lift regulatory requirements on the timing of annual general meetings and allow extensions to deadlines for submitting information to Companies House, the government body which deals with the regulation of limited companies.

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