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Coronavirus - The insolvency landscape amidst the COVID-19 pandemic

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It will not be news to anybody that coronavirus (COVID-19) is having a catastrophic impact on most businesses. Governments internationally are all facing the same crisis and are being forced to take urgent and unprecedented action to limit the fall out and assist businesses in surviving this period of uncertainty.

The Royal Courts of Justice recently announced that all winding-up and bankruptcy petitions currently scheduled for hearings are now being adjourned to hearing dates in June 2020 onwards.

The judiciary has noted that it is not appropriate for the general winding-up and bankruptcy list to be conducted remotely.

It is however likely that much bigger changes are afoot. It was reported this week that The Department for Business, Energy and Industrial Strategy has already canvassed insolvency and restructuring experts on a possible suspension of wrongful trading laws and the possibility of implementing a temporary moratorium for businesses undergoing a restructuring process, during which time they cannot be put into administration by creditors.

In order to understand what changes are likely to come into place, it is helpful to look at some of the key developments that have already taken place internationally.

Australia

On 22 March 2020, the Australian Government announced the following changes to the law, as a result of the coronavirus crisis, which will last for six months, unless extended further:

The Australian Taxation Office has also announced that it will enter into arrangements with taxpayers as necessary, including temporary reduction of payments or deferrals, or withholding enforcement actions.

Spain

On 19 March 2020 Royal decree-law 8/2020, dated 17 March 2020, was published in the Spanish Official Gazette, which set out the following urgent measures to fight social and economic impact of Covid-19 coronavirus:

Germany

In addition to providing the multi-billion Euro rescue package for Germany, the German government has already introduced emergency laws to ban winding-up petitions during the COVID-19 crisis.

It has also been widely reported that the federal government intends to suspend the obligation to file for bankruptcy until 30 September this year.

Summary

Whilst it is unclear exactly was measures the UK government will elect to take, the measures outlined above give a good indication as to what they may well be considering and what could be in the pipeline.

Whilst these measures, if they are to come in, may well give businesses a breathing space it remains vital for businesses to work with their key stakeholders and seek advice on what steps they can take to best protect both the business and its directors from potential creditor action further down the line.

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.