The Corporate Insolvency and Governance Act 2020 is one of the largest shake-ups of insolvency laws in nearly 20 years.
Allan Cadman, who is the North West Chair of R3, the trade body for insolvency and restructuring professionals, says the Act will give companies the breathing space and tools required to maximise their chance of survival.
Mr Cadman said: “Our members already play a key role in assisting firms through financial difficulty, and the Act gives them additional tools to support this important work at a critical time for the economy.
"These tools now need to be tested in practice, but we are hopeful that they will prove to be successful.”
The new Act introduces a moratorium which will give struggling companies a period of 20 business days to consider a rescue plan during which time they are protected from winding up petitions and legal action.
This can be extended to 40 business days, with further extensions at the agreement of creditors or the court.
Further measures include temporary changes to wrongful trading provisions, which will enable businesses to continue to operate without the threat of personal liability to directors.
The Act, which has passed into law after receiving Royal Assent at the end of last week, has also been welcomed by a string of other business groups including the accountancy body the ICAEW and the Insolvency Practitioners’ Association (IPA).
Mr Cadman, who is also a partner at insolvency practitioners Poppleton and Appleby, added: “The legislation will give businesses crucial breathing space and increased flexibility to review options without being pushed prematurely into an insolvency procedure.
"This new approach could make a significant contribution to repairing the economic devastation caused by the current pandemic.”
