Oldham expert welcomes plans to protect struggling businesses

Date published: 22 May 2020

Government measures to help businesses survive the pandemic have been welcomed by an Oldham insolvency expert.

The Corporate Insolvency and Governance Bill published this week includes proposals to give struggling businesses a ‘breathing space’ and protect them from winding up petitions.

Allan Cadman, the North West chair of R3, which represents insolvency and restructuring professionals in the region, said: "The measures contained in the Bill will support the profession's efforts to help businesses navigate the enormous economic damage caused by the pandemic - this legislation comes not a minute too soon.”

The Bill proposes an initial 20-day moratorium to give struggling businesses a formal breathing space to pursue a rescue plan.

During this period no legal action can be taken against the business without leave of the court.

It includes provisions to void statutory demands and restrict winding up petitions in the period up to June 30, and it relaxes the threat of personal liability for company directors who are doing their best to keep the business going but might be trading while insolvent during, and as a result of, the lockdown.

Where a company is in a moratorium period, or an insolvency or restructuring procedure, suppliers will not be able to use the terms of their contracts to raise prices or stop supplies – although the customer will need to pay for any new supplies made.

Smaller suppliers will be exempt and there are safeguards for others at risk of hardship.

Allan, who is also a partner at insolvency firm Poppleton and Appleby, added: "The new tools will add to the options available to insolvency and restructuring professionals trying to rescue businesses and will enhance the UK's globally recognised insolvency and restructuring framework.

"We are also pleased our feedback on the draft proposals has been taken on board by the Government.

"Previously, for example, the moratorium would only have been open to solvent businesses, but now the legislation will enable insolvent businesses to obtain a breathing space to review their options, free from the risk that a creditor may push the company into an insolvency procedure prematurely.

“This greatly increases the number of struggling but potentially viable businesses who could benefit from a vital breathing space and will help to repair the economic devastation caused by the pandemic.

"We appreciate that in producing this Bill, the Government has condensed a process that usually takes more than year into just a few weeks.

"The profession will therefore be keen to examine the detail of the legislation, but overall, will welcome this positive step forward."

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