COVID-19 - Changes to insolvency laws to deal with Coronavirus pressures

On Saturday 28th March Alok Sharma, the UK Business Secretary announced new plans to protect businesses from the normal threats of enforcement.

Under the plans, the UK’s Insolvency Framework will add new restructuring tools including;

  • a moratorium for companies giving them breathing space for from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure;
  • protection of their supplies to enable them to continue trading during the moratorium; and
  • a new restructuring plan, binding creditors to that plan.

The proposals will include key safeguards for creditors and suppliers to ensure they are paid while a solution is sought.

The government is also to temporarily suspend the wrongful trading provisions to give company directors greater confidence to use their best endeavours to continue to trade during this pandemic emergency, without the threat of personal liability should the company ultimately fall into insolvency.

Existing laws outlawing fraudulent trading and the threat of director disqualification will continue and are intended to act as an effective deterrent against director misconduct.

The aims of the changes are to ensure that UK companies “emerge intact the other side of the Covid-19 pandemic”. These changes are intended to be implemented retrospectively from the beginning of March2020. The legislation is to be implemented at the earliest opportunity.

The precise nature of these powers is yet to be confirmed but we would advise that if the decisions contemplated are taken, they are fully recorded in the board minutes should such decisions be challenged at a later date and kept under review. As soon as possible after the end of the emergency measures, plans should be prepared to return the company to its solvent position.

For further information on this, please see

For information about this, or any other business service, please contact Shaun Owen at or telephone 01905 723561.

Information accurate as at 30th March 2020.

Added: 31 Mar 2020 13:23

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