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Last week, the Institute of Directors (the IOD) called for changes to emergency insolvency measures to prevent widespread company collapses.
Under normal laws, the board of directors has a strict duty to cease trading if the company is facing insolvency, and may face personal financial or legal liabilities at a later date if they seek finance instead of doing so.
The Institute of Directors (IOD) called on the government to relax the existing insolvency obligations, which includes a moratorium on the current offence of wrongful trading. They asked the Government to prioritise jobs and the business survival by relaxing the insolvency obligations put on directors and thereby providing business owners and leaders greater room for manoeuvre during the COVID-19 crisis.
Jonathan Geldart, Director General of the Institute of Directors, as part of his statement, said: “We should not allow a single viable businesses to go to the wall because of this crisis.”
In response, Business Secretary Alok Sharma recently announced that there would be changes to the elements of the insolvency system to help keep UK companies trading.
During his briefing on March 28th, he told workers and business leaders that he “appreciates just how tough the situation is”.
Sharma told them: “You are delivering for our nation through this difficult time.”
He said that legislation will be introduced soon to allow UK companies to “weather the storm” of the virus.
There will also be a temporary suspension of “wrongful trading” rules which make it a criminal offence for a company director to keep on trading if they know the business is unable to repay its debts.
Companies required to hold annual general meetings will also get help – either being able to postpone or hold the AGM online.
Sharma also said that workers can now defer their annual leave for another two years to protect staff from losing out, while providing businesses with flexibility when they need it most.”
Jonathan Geldart, Director General of the Institute of Directors, responded: “We are very pleased the Government has listened to the concerns of directors and announced these welcome measures. During the current crisis, directors are facing immense challenges and these are pragmatic steps to provide relief during this unprecedented period. The temporary suspension of ‘wrongful trading’ insolvency provisions will help to avert entirely preventable corporate collapses. It’s absolutely right that the Government should look to prioritise jobs and business survival.”
- a temporary suspension of “wrongful trading” rules.
- Companies required to hold annual general meetings will also get help – either being able to postpone or hold the AGM online.
- workers can now defer their annual leave for another two years.
- further measures to be announced.
Read the full article here: IoD calls for emergency insolvency measures to avert company collapses