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Alok Sharma

Relaxation of insolvency rules welcomed

A relaxation of the insolvency rules to help businesses weather the storm of coronavirus has been welcomed by business groups.

New rules will allow companies to continue buying supplies such as raw materials or energy while they attempt a rescue.

There will also be a temporary suspension of wrongful trading provisions for company directors to remove the threat of personal liability during the pandemic, which will apply retrospectively from March 1.

Business secretary Alok Sharma said the government will give firms that are facing bankruptcy “extra time to weather the storm and be ready when the crisis ends while ensuring that creditors get the best return possible.”

He added: “It is crucial that when the crisis passes, as it will, we are ready to bounce back.”

There will also be a temporary suspension of wrongful trading provisions for company directors to remove the threat of personal liability during the pandemic, which will apply retrospectively from March 1.

Matthew Fell, chief UK policy director at the Confederation of British Industry, said: “The CBI welcomes these interventions at a critical time for business.

“The temporary suspension of wrongful trading provisions, along with other measures, will give much-needed headroom for company directors to enable otherwise viable businesses to use the government’s support package and weather this crisis.”

And Phil Smith, managing director of Business West, said: “Businesses will welcome the government’s sensible steps to amend insolvency laws to help protect companies weakened by the impact of coronavirus.

“It is right that the rules on wrongful trading are temporarily suspended to ensure that directors are not penalised for doing all they can to save companies and jobs during this turbulent period.

“Companies that were viable before the outbreak must be supported to ensure they can help power the recovery when the immediate crisis is over.

“Cashflow remains an urgent concern for many businesses, so it’s vital that government support packages reach businesses and people on the ground as soon as possible.”