The announcements do go some way to enabling directors, in conjunction with their advisers, to better control a restructuring process:
- New rules to prevent suppliers from cancelling contracts with businesses in an insolvency procedure.
- A short business rescue moratorium to protect companies from creditor action while they consider their options; and
- A new court-based restructuring tool modelled on the pre-existing English Scheme of Arrangement;
However, the suspension of wrongful trading risks sending the wrong message that businesses can simply incur debt whilst not acting in the best interests of creditors. For the vast majority of directors, they will be aware of their duties and for the small minority, the suspension provides the opportunity to abuse the insolvency regime. Personal liability remains an issue however as the majority of insolvency provisions governing the actions of Directors remain in force and still lead to personal liability. It is important directors seek advice from professionals on continuing to trade where there is any doubt about the future viability of the company.
My colleagues and I continue to advise large numbers of businesses facing severe levels of distress and we would urge the Government to work at pace to provide the details of these measures (together with the implementation of more wide ranging restructuring tools) to ensure that the rescue of viable businesses continues to be possible.
