The Institute of Directors (IoD) has called for the government to extend emergency coronavirus (COVID-19) insolvency measures to prevent company collapses and job losses.
Directors have a duty to cease trading if their company is facing insolvency or if insolvency cannot realistically be avoided in the near future, and could face financial or legal liabilities if they seek finance instead. In June, the government introduced emergency COVID-19 legislation – the Corporate Insolvency and Governance Act 2020 – to suspend the threat of liability for such ‘wrongful trading’.
This protection expires on 30 September. However, the IoD is warning that failure to extend the measure could lead to ‘entirely preventable company collapses’. The business group is calling for the government to extend the measure until the end of 2020 to aid the economic recovery and to help safeguard jobs.
‘The recovery has begun, but businesses are not out of the woods yet,’ said Roger Barker, Director of Policy and Corporate Governance at the IoD.
‘The government has rightly supported business survival, and emergency legislation in June was an important step. The need for this support has only intensified as we enter the next stage of the recovery. Firms trying to adjust will face steep costs and limited revenues.’
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