Coronavirus: Bad debts and commercial disputes
Mark Osgood | 10.04.2020
10.04.2020 Samantha Grose
During the last few weeks we have seen big names including Flybe, Carluccio’s and BrightHouse enter administration. Debenhams has entered into urgent talks with landlords regarding rent cuts and rent and service charge holidays in an attempt to save some of its stores. These talks will likely result in Debenhams entering into a second CVA, previously entering into a CVA in 2019.
The coronavirus crisis has had an impact on businesses of all sizes in various industries. At this uncertain time it is difficult for businesses to know what steps they should be taking to protect their business as much as possible and when/if they should be looking at insolvency procedures. We hope this article can provide you some guidance on the practical steps you can take during this crisis.
Changes to insolvency legislation
On 28 March 2020 the government announced that emergency changes would be made to the existing insolvency legislation including:
This will provide some comfort to directors during this time. Under the current wrongful trading legislation a director can be personally liable if the company has gone into insolvent liquidation and, at some time before the commencement of the winding up of the company, the director knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation.
The legislation regarding fraudulent trading and directors’ disqualifications is likely to remain as it is. Under the fraudulent trading legislation, a person (not just a director) can be personally liable if in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose.
The government has not yet provided a date for these changes but said they would be made at “the earliest opportunity”.
Delays to winding-up and bankruptcy petitions
Additionally, winding-up and bankruptcy petitions scheduled for hearing from 25 March 2020 have been largely adjourned until June 2020.
Practical steps directors can take during this time
It is important for all businesses to be proactive and adaptable during this extremely difficult time. Our Insolvency and Restructuring Team and Company Team are happy to assist you, should you require any assistance during this time.