Tax & admin · 25 March 2020

NEWS: Ministers may suspend winding up petitions due to COVID-19

insolvency

Government ministers are considering suspending winding-up petitions as the economic impact of the coronavirus outbreak in the UK heightens the risk of personal and commercial bankruptcies.

The Government has hinted that insolvency laws could be halted in order to prevent an unprecedented number of businesses and individuals from falling into bankruptcy as the commercial uncertainty following the virus outbreak continues.

Sources from within the Insolvency Services suggest a series of emergency laws could be implemented to tackle the issue, and apart from halting winding-up petitions, could see other rules suspended on business misdemeanours including “wrongful trading in order to afford more protections for directors.”

This news comes following other governmental implementations of emergency legislation such as “the deferral of VAT payments” as well as a short-term “suspension on commercial property evictions for non-payment of rent” in attempts to ease the economic fallout caused by the virus.

The Government continues to consider what other policies should be enacted to save “struggling businesses” and individuals from financial ruin over the next few weeks, and even months.

So far, other government initiatives such as the Coronavirus Jobs Retention Scheme as well as the option for employers to put staff on furlough have so far prevented a landslide of company administrations. But whether they are enough to prevent a greater business catastrophe further down the line remains to be seen.

One organisation that is lobbying the Government to enforce greater policy clarification for businesses during this time is the insolvency law committee of the City of London Law Society.

In their letter of petition to the Insolvency Service, they demand that in the case of a business facing an insolvency threat at this time, “the creditors’ ability to present winding-up petitions” be removed, while a “90-day grace period triggered by directors” implemented instead which would state “the company is facing temporary liquidity or operational challenges as a result of circumstances related to Covid-19”.

Sign up to our newsletter to get the latest from Business Advice.


 
TAGS:

ABOUT THE EXPERT

Annie May is the Features Editor at Real Business and Business Advice. Following her graduation from LSE, she embarked upon a freelance career in current affairs journalism. Annie has written on subjects varying from African history and contemporary politics to community business and current affairs news in London. At Real Business and Business Advice, Annie is passionate about highlighting inclusive and diverse business disruptors and organisations for our evolving readership. Annie believes in fostering community inclusion and has volunteered for organisations such as Fairfield House, a UK based Rastafari centre and a senior citizen association for ethnic minority men and women.

HR