BHETA business support provider, Let’s Talk Credit, shares PWC’s review of the new insolvency reforms:
The Business Secretary, Alok Sharma, announced at the weekend that the Government would be rushing through some Insolvency reforms in order to aid businesses in the current climate. Insolvency reforms had already been proposed (in August 2018) and the Government was waiting for an opportunity to get them through Parliament so they have used the 2018 reforms as the basis for these ’emergency’ ones. Unfortunately, Mr Sharma did not go in to much detail and did not give a timescale for their introduction. Parliament is in recess at the moment for Easter and does not return until 21 April so they won’t be introduced in the very short term.
A link to the Government website which contains details of the announcement is here
In brief, details of the measures (such as are available) announced are:
Wrongful trading rules will be temporarily suspended for 3 months, to be backdated to 1 March 2020
New restructuring plan which will be a cross between a CVA and a Scheme of Arrangement. Companies will put a restructuring plan to creditors and will need each class of creditor to vote on it. 75% agreement is needed but if this can’t be achieved a company can apply to Court for the Court to order the plan to be put in to place, effectively forcing dissenting creditors to be bound by it.
A 3 month moratorium for companies that are looking to restructure. During the 3 months creditors will be unable to take any enforcement action, including Retention of Title, but should be able to inspect stock if that is included within their terms and conditions. During the moratorium suppliers may be unable to terminate contracts on the basis of the restructuring, insolvency or any financial problems of the company but can still terminate for non payment.
In addition, the following measures are already in place:
Companies House will grant a 3 month extension for year end filing of accounts but companies must apply and must note that Covid-19 is the reason for the request.
The Business and Property Court has postponed all winding up hearings until at least 17 June – see announcement here
HMRC has suspended all enforcement action. If anyone has any issues then they will need to contact the enforcement office using this email address firstname.lastname@example.org
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