Insolvency law announced to protect UK companies during coronavirus

COVID-19 Advice

We were very interested to see that Parliament this week introduced a new Corporate Insolvency and Governance Bill.
The central aim of this bill is providing more opportunities to rescue those companies in serious financial difficulty due to the impact of Covid-19. This bill is intended to offer enhanced protection from the threat of creditor action while companies are under the effects of the pandemic.

Table of Contents

• Details on new debt restructuring tools
• Our thoughts on the new legislation
• Additional advice for businesses

Details on new debt restructuring tools

UK businesses will be able to utilise new debt restructuring tools to enable them to stay in operation during the crisis. These include:

• Enabling a “company moratorium” where companies in financial difficulty are given a period of ‘breathing space’ for 20 business days, which can be extended to 40 days, allowing them to establish a rescue plan without the threat of legal action from creditors.
• Changing the termination clauses that exist in supply contracts, meaning that when a business begins an insolvency or restructuring process, suppliers will not be able to use contractual terms to increase prices or stop supply.
• Enabling businesses in financial trouble, or their creditors, to put in place a “restructuring plan”, which other creditors are forced to agree to if a court sanctions it as “fair and equitable”.

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Our thoughts on the new legislation

Jason Elliott, our Head of Business Recovery, stated: “This legislation is very much welcomed. The coronavirus pandemic has caused a great deal of harm to many businesses in a number of sectors that were historically successful and profitable.”

“This bill will ensure that those viable companies are afforded the requisite time to enable them to seek professional restructuring advice which will ultimately give them the best opportunity to avoid a formal insolvency process.”

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Additional advice for businesses

A business restructure may seem like a daunting and time-consuming process to undertake, particularly at the present time. The Insolvency Experts have years of experience in providing expert financial services in this area, including CVA options and Company Administration services. If you believe a business restructure may be suitable, please get in touch with Jason directly on jason.elliott@cowgills.co.uk or call us on 0300 303 8284.

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