More information has been made available on the package of support for businesses that the government has put in place. Further clarification on the Jobs Retention Scheme and some temporary changes to the insolvency rules that will help those firms experiencing difficulties.
Jobs Retention Scheme
- government to cover employer National Insurance and pension contributions of furloughed workers – on top of 80% of salary
- those furloughed can volunteer for the NHS without risking their pay
Businesses furloughing staff during the coronavirus outbreak will receive further financial support – with the costs of employer national insurance and pension contributions being covered by the government. Under the scheme, employers can claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500 a month.
In a move that could save businesses an extra £300 a month for each employee under the scheme,the government will now cover the employer national insurance and minimum auto-enrollment pension scheme contributions employers pay on the wages they must pay their furloughed staff – on top of the wages covered under the scheme.
Government amends insolvency law to help companies keep trading while they explore options for rescue
Under the plans, the UK’s Insolvency Framework will add new restructuring tools that mirror the USA’s Chapter 11 procedure, a well-established model adopted by countries around the world. This includes:
- A moratorium for companies giving them breathing space for from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure;
- Protection of their supplies to enable them to continue trading during the moratorium; and;
- A new restructuring plan, binding creditors to that plan
The proposals will also include key safeguards for creditors and suppliers to ensure they are paid, while existing laws against fraudulent trading and the threat of director disqualification will continue to act as an effective deterrent against reckless misuse of these new measures.
Wrongful trading provisions
The Government will also temporarily suspend the wrongful trading provisions to give company directors greater confidence to use their best endeavours to continue to trade during this pandemic emergency, without the threat of personal liability, should the company ultimately fall into insolvency.
The proposals will also include key safeguards for creditors and suppliers to ensure they are paid, while existing laws against fraudulent trading and the threat of director disqualification will continue to act as an effective deterrent against reckless misuse of these new measures.
In addition, while laws against fraudulent trading and director misconduct will continue to provide a deterrent against poor practices, wrongful trading provisions in the Insolvency Act will be temporarily suspended specifically to give confidence to directors to continue trading without the threat of personal liability, should the company ultimately fall into insolvency.
