Changes to insolvency laws will give struggling businesses ‘breathing space’

Businesses will be given “breathing space” if they are struggling due to Covid-19 with a temporary easing of the rules around insolvency.

Business Secretary Alok Sharma acknowledged that not every business will survive the pandemic, but said the measures introduced in the Corporate Insolvency and Governance Bill, give them a “fighting chance”.

Labour’s shadow business secretary Ed Miliband said that every viable business that is saved will make the economic recovery easier.

Mr Sharma told MPs: “The Bill will allow business owners time and space to explore rescue options.

“It will allow directors of companies that are technically insolvent, but simply because of a temporary drop in demand to trade because of the Covid-19 crisis, to be able to proceed with the business without threat of personal liability.”

The Bill would also allow for annual general meetings (AGMs) to be held virtually and also give companies more time to file key account documents.

Speaking during the Bill’s second reading in the Commons, Mr Sharma said: “The whole point of these measures, both the permanent and the temporary ones, is… to give businesses breathing space to allow them the chance to see whether they can recover and ultimately bounce back, it’s what we all want to see.”

He added: “If there is a need to extend some of these temporary provisions then, of course, we will look to see if that’s needed.

“And of course, while we recognise that these and other support measures will sadly not be able to save every business and every job, this Bill delivers on commitments which will give businesses in difficulty during the pandemic a fighting chance of eventually bouncing back.”

Mr Miliband added: “Just as we are mutually dependent on each other when it comes to controlling the pandemic, so that sense of mutual dependence should extend to the businesses of our country because it’s the right thing to do and it’s because it’s in all of our interests.

“Every viable business we save will make the recession less deep and the recovery easier.

“Every business that is lost is not only disastrous for that business and their workers but also for our economy and all of us.”

Mr Sharma appeared to struggle as he made his speech at the despatch box, wiping his face several times with a handkerchief and at one point Mr Miliband passed him a glass of water.

Former minister Jonathan Djanogly (Huntingdon) was one of a group of Tory MPs who expressed concerns with the finer details of the Bill and suggested that the one day allocated for all of its stages was “inadequate”.

“Yes, we face another crisis now, but rushing these changes through will not in my view produce the best law,” Mr Djanogly said.

He added: “My concern is that this Bill, whilst well meant, may not properly work for lack of scrutiny or provide dubious short-term benefit at the cost of longer-term trust in our economic system.

“In market economies weaker businesses will sometimes fail, particularly in a downturn, but I would suggest that the Government’s role is to provide confidence in the marketplace rather than of the companies themselves.”

The Bill later cleared the Commons unamended and will undergo further scrutiny in the Lords at a later date.