UK Government announced New Measures on Insolvency Law due to COVID-19 Pandemic
On March 28, 2020, the UK Government has announced new measures on bankruptcy law in order to support businesses during the COVID-19 outbreak. The measures planned to be presented to the Parliament at the earliest opportunity include the temporary suspension of the provisions on wrongful trading liability of company executives, the implementation of a new restructuring plan and moratorium in order to provide companies time during the pandemic.
Firstly, the implementation of the provisions on wrongful trading liability of company executives is decided to be suspended. Wrongful trading is an offence in which company executives continue to trade even if they know that the company cannot avoid getting into liquidation. With the suspension, the UK Government aimed to protect the company executives by enabling them to make payments to employees and suppliers during the pandemic without having a bankruptcy pressure.
Furthermore, the measures include a temporary moratorium for businesses undergoing a restructuring process in which the creditors will not be in charge of administration. The objective of these changes is to help UK companies under restructuring process to keep trading.
UK government has announced that that the new legislation will be presented to the Parliament at the earliest opportunity. The measures are planned to be implemented retroactively.