The government has relaxed the insolvency regulations during the COVID-19 pandemic in order to give restructuring businesses time to continue trading.
The changes will temporarily suspend wrongful trading provisions retrospectively from 1 March 2020 for three months for company directors, enabling them to continue running their businesses without the threat of personal liability.
The Institute of Directors (IoD) welcomed the changes to the insolvency rules. Jonathan Geldart, Director General of the IoD, said: ‘During the current crisis, directors are facing immense challenges and these are pragmatic steps to provide relief during this unprecedented period.
‘The temporary suspension of ‘wrongful trading’ insolvency provisions will help to avert entirely preventable corporate collapses.’
The Institute of Chartered Accountants in England and Wales (ICAEW) also welcomed the changes. A spokesperson for the ICAEW said: ‘This is a pragmatic move and a useful addition to the government’s strategy to protect employment and prosperity. The proposed moratorium will definitely help some businesses survive, but we would encourage any directors with concerns about their company to seek professional advice at the earliest opportunity.’