The reforms will provide greater certainty for company directors seeking to save financially distressed but viable companies and are designed to promote a culture of entrepreneurship and innovation by providing breathing space for distressed businesses.
The reforms were first introduced in 2017 as part of the government’s National Innovation and Science Agenda to ensure directors can focus on options to turn around distressed companies without unnecessarily worrying about their personal liability, provided the company is genuinely attempting to restructure.
The Review of the Insolvent Trading Safe Harbour tabled in Parliament identified examples where the safe harbour has helped achieve restructures to the benefit of both creditors and employees and found that, overall, the safe harbour offers considerable assistance in encouraging turnarounds.
The government commissioned an independent panel of experts to conduct the review between August and November 2021 and its recommendations focused primarily on simplifying and clarifying the wording of the safe harbour provisions, and providing greater plain English guidance, to ensure the safe harbour is accessible to directors.
The government will consult on the legislative detail in due course.
