Dealers facing insolvency as they struggle to keep their heads above water because of the coronavirus pandemic are being thrown a lifeline by the government.
Business secretary Alok Sharma, pictured, has announced that adjustments will be made to the insolvency laws ‘at the earliest opportunity’ so that businesses can ‘weather the storm’.
Speaking at a Downing Street press briefing on Saturday, he said the changes to the bankruptcy rules would mean firms could carry on trading and ’emerge intact the other side of the Covid-19 pandemic’.
New rules will let firms continue to buy supplies, such as energy, raw materials or broadband, while trying to save their company. Wrongful trading provisions will also be temporarily suspended for company directors, which means they won’t face the threat of personal liability while the pandemic is happening.
It is being applied retrospectively from March 1 and will last for three months.
‘Our overriding objective is to help UK companies which need to undergo a financial rescue or restructuring process to keep trading,’ he said.
‘These measures will give those firms extra time and space to weather the storm and be ready when the crisis ends, whilst ensuring creditors get the best return possible in the circumstances.’
Mr Sharma added that the necessary legislation would be brought forward at the ‘earliest opportunity’.
But he emphasised that all other checks and balances that helped ensure directors fulfilled their duties properly would stay in place.
In response, Suren Thiru, head of economics at the British Chambers of Commerce, said: ‘Companies that were viable before the outbreak must be supported to ensure they can help power the recovery when the immediate crisis is over.
‘Cashflow remains an urgent concern for many businesses, so it’s vital that government support packages reach businesses and people on the ground as soon as possible.’
Matthew Fell, chief UK policy director at the Confederation of British Industry, welcomed the interventions at what he called a ‘critical time’ for businesses.
‘The temporary suspension of wrongful trading provisions, along with other measures, will give much-needed headroom for company directors to enable otherwise viable businesses to use the government’s support package and weather this crisis.’
Flexibility will also be allowed for companies that need to hold annual meetings, which could mean postponing them, or holding them online or by phone using only proxy voting, sticking to public health guidance.