Eleanor Temple, chair of insolvency and restructuring trade body R3 in Yorkshire and a barrister at Kings Chambers in Leeds, responds to Saturday’s (28 March) announcement of changes to corporate insolvency framework:
“The UK has a world-leading insolvency and restructuring framework, and the new restructuring tools in this package give our profession more options to help businesses navigate COVID-19 disruption. We’re pleased Government has listened to the profession’s feedback and is focused on making these tools accessible for the businesses that need them.
“The details of how exactly these tools will work are still to be fleshed out, but we’re hopeful that the Government will address many of the concerns the profession has expressed about the reforms since they were first announced in 2016. The moratorium, for example, will not be useful if it can’t be accessed by insolvent companies. It’s important that, as the Government works on the details, it listens to creditors – including lenders, the wider business community, and landlords – on how they will be affected by the moratorium.
“Until the tools are introduced, the profession will continue to use the wide range of tools it has at its disposal to help restructure businesses and rescue jobs.
“The profession will, however, have some serious concerns about the Government’s plans to suspend wrongful trading. A blanket suspension could risk abuse. The provisions are there for a reason and protect creditors. We do understand that directors may be worried about the consequences of continuing to trade amid the COVID-19 disruption if they’re missing debt payments, but good advice from an insolvency practitioner or insolvency lawyer will remove their risk of facing a wrongful trading action.”