The government is pushing to overhaul insolvency laws to help companies and individuals weather the economic crisis caused by the coronavirus pandemic.
The Insolvency Service has begun asking for the views of the restructuring industry about potential urgent changes to company legislation, Sky News reported.
The reforms could include a moratorium on winding-up petitions against companies and the suspension of rules on wrongful trading to help protect directors.
One lawyer involved in the consultation told City A.M.: “The industry has submitted material to the government about whether we should modify the rules as they have done in other jurisdictions.
“It would be around protecting companies from their creditors, it would be around providing some sort of temporary suspensions on companies being wound up possibly providing a moratorium – and protecting directors who carry on trading from personal liabilities.
“I have been working with other lawyers in the City on that – we have been liaising with other industry participants and with the government,” they said.
Sky News reported that the insolvency division of the City of London Law Society had submitted a document to the government urging a suite of emergency reforms.
The government was pushed to remove creditors’ ability to present winding-up petitions, with the introduction instead of a 90-day grace period triggered by directors “stating that the company is facing temporary liquidity or operational challenges as a result of circumstances related to Covid-19”.
The paper also said the 10-day moratorium period within which company directors file a notice of intention to appoint administrators should be extended.
“A reasonable period within which to put measures in place to overcome the temporary liquidity problem which [would] be less than the 90 day period of protection under the proposals made above in respect of winding-up petitions because companies who could not put such measures in place expeditiously would retain the ability to go into administration with a view to their rescue as a going concern,” it said.
Sky reported that business groups such as the Institute of Directors and the CBI had been pressing for the changes
The Insolvency Service was contacted for comment.