The Department for Business, Energy and Industrial Strategy (“BEIS”) over the weekend announced a number of proposed changes to UK insolvency law in response to the COVID-19 crisis.

On 28 March 2020, the Secretary of State for Business, Energy and Industrial Strategy (BEIS) announced key measures to protect companies and businesses facing major funding and operational difficulties in the current COVID-19 pandemic.^[1] The measures will involve the Government bringing forward legislation at the earliest opportunity to amend current U.K. insolvency law to give firms extra time and space to weather the current storm while ensuring that creditors can get the best return possible in the circumstances.

Last week and, again, on Saturday 25 March 2020, the government announced plans to introduce changes to current insolvency laws to ease pressures on UK businesses being caused by the global pandemic, COVID19. See latest announcement here.

Whilst we await sight of the specific terms of the draft legislation, amongst the changes announced, include:

The outbreak of coronavirus COVID-19 represents one of the most significant global public health crises in recent memory and is causing major disruption and unprecedented volatility in markets, economies and businesses. With such great social and economic uncertainty, it is inevitable that existing financial arrangements will be affected and asset-based lenders (ABLs) are not immune to this. They are, however, uniquely positioned – given the flexibility of the products they offer – to react to the ever-changing economic landscape.

Welcome to this bulletin from 1 Chancery Lane's Property, Chancery and Commercial Law team.

In this edition:

The UK government has announced that it will introduce legislation at the earliest opportunity to, among other things, give businesses greater flexibility to help them emerge intact at the end of the pandemic.

The Government has announced they will be relaxing the law for companies undergoing a rescue or restructure process, giving them breathing space that could help avoid insolvency. 

Company insolvency

When is a company insolvent?

In general terms, a company is insolvent if it is unable to pay its debts as and when they fall due. 

A company may also be considered to be insolvent if the value of its assets is less than the amount of its liabilities, taking into account contingent and prospective liabilities.

Covid-19 has introduced significant uncertainty to any assessment by directors about their company’s solvency.

Proposed changes to UK insolvency laws aim to support companies under pressure due to COVID-19.

On 28 March 2020, the UK government announced a number of reforms to UK insolvency laws:

On Saturday 28 March 2020, the Government announced significant changes to UK insolvency law to help companies and directors weather the economic storm caused by the Coronavirus (COVID-19) pandemic.

As part of a range of measure to help companies, the Business Secretary, Alok Sharma, announced: