The U.K. government has announced a series of measures intended to support businesses impacted by coronavirus/COVID-19, including suspension of the wrongful trading regime, a job-retention scheme and a temporary ban on the eviction of commercial tenants.

Suspension of Wrongful Trading Regime

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:

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:

The UK Government has announced wide-ranging emergency legislation in response to the Coronavirus crisis, in an attempt to reduce the burden on business and allow them to carry on trading during and after the pandemic. Some of the changes (other than the one on wrongful trading) were already intended following a consultation process that concluded in 2018 but are now being fast tracked.

The Financial Conduct Authority, the Information Commissioner’s Office and the Financial Services Compensation Scheme have issued a joint statement warning insolvency practitioners to be careful when handling personal data.

The Joint Statement says that the FCA, ICO and FSCS are aware that some IPs and FCA - authorised firms have attempted to sell clients’ personal data to claims management companies, where it is likely claims for compensation will be made to the FSCS.

The UK Government has announced that:

It will temporarily suspend the offence of wrongful trading by directors of English companies for 3 months Amend insolvency laws to bring in more debtor friendly style processes where English companies can continue to trade while negotiating a restructuring solution with their creditors.

As ever, we await full details and legislation.

Wrongful Trading Suspension