Changes to the UK Insolvency Rules Due To COVID-19
New emergency insolvency measures have been agreed to help companies unable to meet all their debts due to the impact of coronavirus from being forced to file for bankruptcy.
In legal terms, this change involves an amendment to the wrongful trading rules within UK insolvency law, which make it an offence for company directors to continue trading if their business is unable to avoid going into liquidation.
This means that company directors will be able to pay staff and suppliers even if there are fears the company could become insolvent.
The changes apply from 1 March 2020 and include a temporary moratorium for businesses undergoing a restructuring process. This prevents them from being put into administration by creditors and entitling them to continued access to raw materials.
These changes will be particularly relevant for non-essential retail groups, restaurants, lifestyle and entertainment companies, travel companies and airlines, who are either facing a decline in demand or enforced closure.
