The government is to change insolvency regulation to give firms more flexibility to handle the coronavirus crisis.
Legislation will be introduced soon to give businesses “extra space and time to weather the storm”, said business secretary Alok Sharma at the government’s daily briefling.
He said: “I want to announce more measures which are designed to give businesses greater flexibility as they face the current crisis, to help them emerge in tact the other side of the Covid-19 pandemic.
“We will introduce measures to improve the insolvency system. Our overriding objective is to help UK companies which need to undergo a financial rescue or restructuring process to keep trading.
“These measures will give companies extra space and time to weather the storm and be ready when the crisis ends while ensuring creditors get the best returns in the circumstances. It is crucial when the crisis passes, as it will, we are ready to bounce back.”
The new rules will apply retrospectively from March 1.
Exact details of the changes have not been revealed but it is anticipated the shake-up will bring in similar regulation to chapter 11 bankruptcy in the US. This allows companies more time to pay off debts while staying in business.
Sharma said the government appreciated “just how tough the situation is” for businesses to survive the coronavirus crisis.
He also announced a temporary suspension of ‘wrongful trading’ rules which make it a criminal offence for a company director to keep on trading if they know the business is unable to repay its debts.
Businesses will also be able to postpone annual general meetings or hold them online while staff will now be able to defer their annual leave for another two years, until 2022.
Furthermore, workers who have not taken all of their statutory annual leave entitlement because of the pandemic will now be able to carry it over into the next two leave years.
Currently, workers lose their holiday if they do not take it and there is also an obligation on employers to ensure their workers take their statutory entitlement in any one year.
The new regulations will allow up to four weeks of unused leave to be carried into the next two leave years, easing the requirements on business to ensure that workers take statutory amount of annual leave in any one year. It is expected to apply mostly to those in food and healthcare sectors.