COVID-19: £250m in loans and insolvency law changes to ease burden on businesses
Chancellor Rishi Sunak outlines Future Fund scheme
Tweaks to trading laws to give firms ‘breathing space’, says Business Secretary
Entrepreneurs and start-ups have received a significant boost on two fronts as they battle to survive the COVID-19 crisis.
The Chancellor has unveiled a new £250m coronavirus Future Fund for UK-based “innovative companies”.
The Government pledged to loan eligible firms between £125,000 and £5 million, subject to at least equal match funding from private investors.
Meanwhile, regulations around wrongful trading are set to be suspended, as the Government simplifies the insolvency system to keep companies trading – particularly those undergoing a rescue or restructure process. The aim is to give them “much needed breathing space”, said Business Secretary Alok Sharma.
Future Fund revealed
The Future Fund scheme, to be delivered in partnership with the British Business Bank, will deliver convertible loans.
It comes after pressure from big UK tech start-ups, who complained of being left out of coronavirus lending schemes, and warned a generation of innovative firms could be lost.
The Save Our Startups (SOS) initiative and 12 of the UK’s biggest tech firms wrote to the Chancellor calling for action.
An initial total of £250,000,000 has been pledged. The Government said it “will keep this amount under review” and the scheme will initially be open from May until the end of September 2020.
Chancellor Rishi Sunak said: “Our start-ups and businesses driving research and development are one of our great economic strengths, and will help power our growth out of the coronavirus crisis.
“This new, world-leading fund will mean they can access the capital they need at this difficult time, ensuring dynamic, fast-growing firms across all sectors will be able to continue to create new ideas and spread prosperity.”
What are the conditions?
To be eligible for a loan from the Government under this scheme, a business must be:
- an unlisted UK registered company that has raised at least £250,000 in aggregate from private third party investors in previous funding rounds in the last five years and have a substantive economic presence in the UK
- subject to customer fraud, money laundering and KYC checks prior to any loan being made
If the company is a member of a corporate group, only the ultimate parent company, if a UK registered company, is eligible to receive the loan.
More details are here.
Wrongful trading regulations frozen
Insolvency rules on directors’ personal responsibility for company debts are to be frozen retrospectively, once Parliament passes legislation. The aim is to protect companies during the COVID-19 pandemic.
Currently, directors of limited liability companies can become personally liable for business debts if they continue to trade when uncertain about whether their businesses can continue to meet their debts.
But the Government revealed on 28 March these were being suspended in relation to actions between 1 March 2020 and 31 May 2020.
Mr Sharma said: “Our overriding objective is to help UK companies which need to undergo a financial rescue or restructuring process to keep trading. These measures will give those firms extra time and space to weather the storm and be ready when the crisis ends, whilst ensuring that creditors get the best return possible in the circumstances.”
Skadden, a global firm advising businesses, welcomed the move, saying: “Relaxation of these wrongful trading rules will reassure directors that the difficult decisions they have to make about the future viability of their business will not have to be unduly influenced by the exceptional circumstances which are entirely beyond their control.”
As the Government’s response to protect the economy and jobs continues to evolve, there will no doubt be more interventions and adjustments to schemes already announced.