New rules to protect struggling companies and directors during the coronavirus crisis have officially become law.
The Corporate Governance and Insolvency Bill gained royal assent last night (25 June) after being fast-tracked through Parliament.
It introduces temporary changes until 30 September to prevent winding up petitions and statutory demands during the coronavirus crisis, as well as a new permanent company moratorium to give viable distressed companies.
The moratorium gives viable distressed companies 20 business days, extendable to 40 or longer by agreement, to pursue a rescue plan.
To qualify, a company must be unable to pay its debts and it is likely that a moratorium would result in a rescue of the business as a going concern.
The exit from the moratorium may be achieved in a number of ways including a rescue, sale, refinance, company voluntary arrangement, scheme of arrangement or restructuring plan.
The law also supports directors to continue trading through the emergency without the threat of personal liability and to protect companies from aggressive creditor action.
“This is a particularly challenging time for businesses right across the UK, and we are doing all we can to support them through this period,” business secretary Alok Sharma said.
“Our proposals have been widely welcomed by business groups.
“The Bill will help companies that were trading successfully before the Covid-19 emergency to protect jobs and put them in the best possible position to bounce back.”