R3: New bill heralds biggest change to UK’s insolvency and restructuring framework for nearly 20 years
The Corporate Insolvency and Governance Bill, which was debated in the House of Commons yesterday, is a significant step forward in attempts to mitigate the enormous economic damage caused by COVID-19, according to insolvency and restructuring trade body R3 in Scotland.
The firm has said that businesses struggling due to the current coronavirus pandemic are set to be offered a substantial lifeline through the implementation of the bill.
The new bill introduces a moratorium which will give struggling companies a 20-business day opportunity to consider a rescue plan, extendable by the directors for a further 20 business days or with creditor consent up to a year.
Further proposed measures include temporary changes to wrongful trading provisions, which will enable businesses to continue to operate without the threat of personal liability to directors. Written warnings from creditors and winding up petitions against companies struggling financially due to the coronavirus could also be suspended.
Tim Cooper, chair of R3 in Scotland and a partner at Addleshaw Goddard, said: “The measures contained in the Bill come not a minute too soon and will add to the options available to insolvency and restructuring professionals trying to rescue businesses.”
The bill, which is set to be expedited through the Parliamentary approval process, could become law as early as this month.
Mr Cooper continued: “The proposed legislation will give both solvent and insolvent businesses crucial breathing space and increased legislative flexibility to review options without being pushed prematurely into an insolvency procedure. This new approach could make a significant contribution to repairing the economic devastation caused by the current pandemic.”
He added: “R3 appreciates that in producing this Bill, the Government has condensed a process which usually takes more than year into just a few weeks. The insolvency and restructuring profession will therefore be keen to examine the detail of the legislation but, overall, we welcome this positive step forward.”
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