New bill to protect bars from ‘aggressive’ debt recovery

The UK government has introduced new insolvency legislation to help businesses, such as bars and restaurants, from “aggressive” debt recovery and to stop them from going bankrupt due to the Covid-19 pandemic.

The UK on-trade has been forced to close due to the Covid-19 pandemic

The Corporate Governance and Insolvency Bill was introduced on Wednesday (20 May) and is designed to help companies restructure their debt and continue trading during the pandemic.

Alok Sharma, UK business secretary, said: “This is a particularly challenging time for businesses right across the UK and we are doing all we can to support them through this period.

“Our proposals have been widely welcomed by business groups. The bill will help companies that were trading successfully before the Covid-19 emergency to protect jobs and put them in the best possible position to bounce back.”

Measures outlined in the bill include the temporary suspension of wrongful trading provisions until at least the end of June, meaning directors can continue trading through the pandemic without the threat of personal liability.

Wrongful trading makes it an offence for a company to continue trading when they know a business will not be able to avoid going into liquidation. Its aim is to protect business creditors, such as suppliers, from falling victim to firms that will not be able to continue operating.

The measure will suspend the use of written demands from creditors to pay a debt where the debt has been caused by coronavirus.

The bill also includes a moratorium on winding up orders, with landlords and investors encouraged to work with businesses, such as those in hospitality, which are unable to pay their bills while the pandemic continues.

On-trade welcomes insolvency bill

Trade body UK Hospitality said the bill was an important piece of legislation.

Kate Nicholls, UK Hospitality chief executive, said: “The bill should provide businesses with some very welcome respite from aggressive landlords and valuable breathing space to restructure their businesses.

“It is very encouraging to see the government listening to the concerns of tenants and landlords, and acting decisively on what is a complex issue.

“The majority of landlords have been cooperative but a minority have aggressively pursued hospitality businesses that are mothballed, have no revenue and cannot hope to pay. It is also positive to see protection extended to landlords to ensure they are not obliged to pursue tenants.”

Nicholls also highlighted that the extension of the moratorium would allow more time for both businesses and the government to understand the “scale of the crisis” in order to start forming more long-term solutions.

“Measures in the bill will provide more breathing space to deliver rent solutions with lower rent liabilities through mandated agreements,” Nicholls added.