UK Government announced New Measures on Insolvency Law due to COVID-19 Pandemic
On March 28, 2020, the UK Government has announced new measures on bankruptcy law in order to support businesses during the COVID-19 outbreak.
The measures planned to be presented to the Parliament at the earliest opportunity include the temporary suspension of the provisions on wrongful trading liability of company executives, the implementation of a new restructuring plan and moratorium in order to provide companies time during the pandemic.
Firstly, the implementation of the provisions on wrongful trading liability of company executives is decided to be suspended. Wrongful trading is an offence in which company executives continue to trade even if they know that the company cannot avoid getting into liquidation. With the suspension, the UK Government aimed to protect the company executives by enabling them to make payments to employees and suppliers during the pandemic without having a bankruptcy pressure.
Furthermore, the measures include a temporary moratorium for businesses undergoing a restructuring process in which the creditors will not be in charge of administration. The objective of these changes is to help UK companies under restructuring process to keep trading.
UK government has announced that that the new legislation will be presented to the Parliament at the earliest opportunity. The measures are planned to be implemented retroactively.
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An important regulation is made temporarily in the execution and bankruptcy law through the Resolution No. 2279 Resolution on Suspending the Execution and Bankruptcy Proceedings (“Resolution”), published in the Official Gazette dated 22 March 2020 and No. 31076. The resolution is summarized below.
Pursuant to the Presidential Resolution on Suspending the Execution and Bankruptcy Proceedings, which was published in the Official Gazette dated 22 March 2020 and numbered 31076, it has been decided to suspend all active execution and bankruptcy proceedings in the country until 30 April 2020. On the application of this Resolution, the Ministry of Justice, Department of Execution Proceedings published the Circular dated 24 March 2020 ("Circular").