This article was written by Ciara Davies.
The FCA believes that these provisions will help to ensure that the UK’s existing special insolvency regimes for the financial sector firms remain effective and that financial market participants have the legal certainty to ensure that markets run effectively.
The Bill provides for the measures set out below.
Company moratorium
One of the proposed measures in the Bill is to create a moratorium during which no legal action can be taken or continued against a company without the court’s permission.
Suspension of termination clauses
Pre-insolvency of a company, suppliers will usually rely on their contractual right to stop or threaten to stop supplying the company. The proposed measures would prevent suppliers jeopardising the rescue of a company in this way. However, protection is given to the supplier to ensure the supplies are paid for and relieve this requirement if it would cause hardship to their business.
Temporary suspension of wrongful trading provisions
The Bill proposes removing the threat of personal liability arising from wrongful trading for directors who continue to trade a company through the coronavirus pandemic with uncertainty that the company may not be able to avoid insolvency in the future. This will remove the pressure on directors to close otherwise viable businesses and avoid personal liability.
Note that these measures will not apply to all firms and a number of exclusions are expected that will carve out some financial services firms. The Bill also proposes a new Restructuring Plan to be available to financial services firms, with appropriate safeguards including a new role for the FCA and PRA.
Finally, the Bill provides for a number of other insolvency and corporate governance measures where no specific exclusions for financial services are expected, including:
- removing the threat of winding up proceedings where unpaid debt is due to coronavirus
- allowing companies under a legal duty to hold an AGM or general meeting to hold a meeting by other means even if their constitution would not normally allow it
- temporary flexibility of Filing Requirements at Companies House