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New Legislation to protect UK Businesses from Insolvency must also include Northern Ireland Businesses
FPM Accountants says Northern Ireland businesses must be included in new legislation being introduced by the UK Government to protect companies facing insolvency who have been impacted by Covid-19.
The new measures, announced by Business Secretary Alok Sharma on 28 March 2020 aim to enable UK companies undergoing a rescue or restructure process to continue trading, giving them breathing space that could help them avoid insolvency.
Commenting on the new measures, Alison Burnside, a licensed insolvency practitioner and Director with FPM Accountants Ltd said:
“Loss of income due to the impact of Covid-19 is affecting many Northern Ireland businesses, particularly those in the retail, licensed trade and hospitality sectors. While the Minister’s announcement is welcome news for businesses in the UK, it is critical that the new measures enabling companies undergoing a rescue or restructure process to continue trading are extended to businesses in Northern Ireland.”
The legislation will include temporarily suspending wrongful trading provisions retrospectively from 1 March 2020 to help ensure directors are not penalised for doing all they reasonably can to protect the company trading and the livelihoods of their employees.
“Effectively this means that directors will not face the threat of personal liability in the period of suspension. This should help alleviate directors’ concerns when seeking funding during the Covid-19 crisis,” said Burnside.
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In addition to the three-month suspension of the rules of wrongful trading, the new legislation will include a moratorium to protect companies from creditors for a period of time while they seek a rescue or restructure and protect supplies while trading during the moratorium, a new restructuring plan binding creditors to the plan, and safeguards to ensure creditors and suppliers are paid while a solution is sought. There are no changes to the rules around fraudulent trading and the threat of director disqualification for director misconduct.
With the UK Parliament in recess until 21 April 2020, we will have to wait to see whether Northern Ireland is included in the new measures. In the interim, companies in Northern Ireland can still avail of the formal restructuring options of Company Voluntary Arrangement (CVA) or Administration.
For more details of the UK Government’s announcement see Press Release, 28 March 2020. “Regulations temporarily suspended to fast-track supplies of PPE to NHS staff and protect companies hit by COVID-19”.
