Government unveils new tools to support struggling businesses

The government has launched a new range of tools to enhance the rescue opportunities that are
available to struggling businesses.

Designed to strengthen the UK’s business environment, the measures come alongside reforms that
look to boost corporate governance that protects creditors, employees and stakeholders during the
insolvency process.

Efforts to tackle the reckless actions of directors form a further part of government efforts to make
the business climate more appealing to investors.

The new measures follow a consultation in 2016 and the government has suggested that there are
similarities to the Chapter 11 Bankruptcy Code in the US and other comparable international rules.

In an effort to balance support for a struggling company with the interests of its creditors, an
element of breathing space will be given to viable firms for them to restructure or to seek alternative
finance options, free from the threat of creditor action.

A new restructuring plan procedure also aims to provide an alternative for businesses looking to
restructure their debts.

New regulation will also prevent suppliers from terminating contracts should a company enter
insolvency proceedings, providing an added line of support.

In addition to that, the Insolvency Service has been granted new powers to investigate directors of
dissolved companies and to take action in instances where insolvent subsidiary businesses are
unreasonably sold.

Another tool will support unsecured creditors by adding an inflationary rise to the cap placed on the
ring‐fenced pot of finance available to unsecured creditors.

The government has worked to tackle reckless company directors in order to better protect
pensions, workers and small suppliers that can be adversely affected by insolvency.

In a move that builds on corporate governance reforms introduced in 2017, directors will now be
required to explain how a firm will afford dividends and other financial commitments.

The government also wants to ensure that directors have more access to financial training and that a
set of minimum standards can be applied for independent board reviews.

Of course any business in financial distress should seek advice and support from a corporate
insolvency practitioner at the earliest opportunity, as doing so increases the range of potential
rescue options that may be available.

By Phil Smith




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