The UK government has set out plans to change the UK insolvency rules to help businesses who are struggling as a result of the coronavirus COVID-19 outbreak.
What’s changing with UK insolvency laws?
In the UK, you can be made bankrupt in the following circumstances:
- You don’t pay your debts and you owe £5,000 or more
- You break the terms of a Individual Voluntary Arrangement (IVA)
- You provided information that wasn’t true to get an IVA
And, as things stand, the ‘wrongful trading’ rules that form part of the UK insolvency laws make it a criminal offence for company directors to continue trading if they know their business won’t be able to repay it’s debts.
But the government, fearing that thousands of UK businesses could go bust and leave millions unemployed, has decided to relax the rules and encourage businesses to keep trading through these uncertain times.
That is why the emergency measures have been taken to ensure that the ‘wrongful trading’ rule is relaxed to allow businesses to take advantage of the government’s Business Interruption Loan service and take on loans even if their financial future is uncertain.
The new rules will be backdated to March 1, 2020 and directors must still act within the best interests of the business, in line with their director’s duties.
It’s timely action by the government, as business insolvencies were already on the rise, reaching a five-year high at the start of 2019, when 451 administrations in the first three months of the year, represented a 21.8% increase from the final three months of 2018
What other financial help is available for business owners?
If you’re a business owner struggling with a temporary closure, the Coronavirus Business Interruption Loan Scheme provides government-backed loans to encourage lenders to carry on lending to small businesses throughout the coronavirus crisis.
The Covid-19 Corporate Financing Facility (CCFF) which will see the Bank of England buy short-term debt from larger companies, to help support them with cash flow and short term funding.
The Self-Employed Income Support Scheme and Coronavirus Job Retention Scheme are designed to help business owners struggling to pay themselves and employees – you can find more info in our blog Coronavirus grants for business owners, while there are a number of tax breaks and sick pay benefits available.
Find out more at https://www.businesssupport.gov.uk/
