Businesses struggling to stay afloat through the Covid-19 crisis could be saved by the introduction of a new Corporate Governance and Insolvency Bill giving companies time to restructure, refinance and keep trading when they might otherwise go out of business because of debts caused by the coronavirus pandemic.
Under the rules, wrongful trading provisions will be temporarily suspended; meaning directors could continue trading through the pandemic without the threat of personal liability.
Wrongful trading makes it an offence for a company to continue trading when they know a business will not be able to avoid going into liquidation. However, the pandemic means that thousands of businesses have found themselves in a position where they must trade when they are technically insolvent.
The measure will suspend the use of written demands from creditors to pay a debt, known as statutory demands, where the debt has been caused by the coronavirus crisis.
Winding-up petitions, which allow creditors to demand that a company in default of its debt payments will also be suspended until at least the end of June.
Directors still have legal responsibilities under wider company law and these duties would remain in place, as would measures in insolvency law to penalise directors who abuse their position.
When it comes to legal advice, all businesses need someone skilled, reliable and experienced they can turn to for support and guidance. Call John Porter in our Company and Commercial Dept on 0161 624 6811(Option 4) or email jap@wrigleyclaydon.com.
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