Coronavirus insolvency measures must be extended, says IoD
The Institute of Directors is calling for an urgent extension to emergency insolvency measures to prevent a swathe of job losses and company collapses.
In June, the government introduced emergency legislation to suspend the threat of liability for “wrongful trading” until 30 September 2020.
Before the measures were introduced, the board of directors had a strict duty to announce a cessation of trading if the company is facing insolvency, and may face financial or legal liabilities if they seek finance instead of doing so.
The Institute of Directors (IoD) has said that a failure to extend these measures could lead to “entirely preventable company collapses”. It is pushing for an extension to the end of the year, to aid the economic recovery and to safeguard jobs.
Roger Barker, director of policy and corporate governance said: “The recovery has begun, but businesses are not out of the woods yet. As we start to emerge from the pandemic, many normally successful small firms are in a perilous position, and we must give them a chance to get back on their feet.”
Some restructuring firms are preparing for a fresh wave of distress as the government’s schemes that have kept thousands of companies afloat comes to an end.
Businesses in the retail and hospitality sectors have been hardest hit by the pandemic and subsequent lockdown, with a number of retailers pleading with landlords to cut rents.
It follows calls from numerous industry bodies for the extension of the government’s job retention scheme in a bid to stem mass redundancies as it unwinds next month.
Barker added: “Without these measures, we could see some entirely preventable company collapses, putting our economic recovery and jobs at risk. Directors must be in a position to see their organisations through the crisis, they shouldn’t be penalised for acting responsibly amid unprecedented circumstances.”