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Law360, London (May 15, 2020, 3:04 PM BST) -- Banks, insurers and investment companies will not be included in government measures designed to help British businesses avoid insolvency during the coronavirus crisis, the Financial Conduct Authority has said, as it seeks to provide legal certainty to the financial market.
The City watchdog said Thursday that financial institutions, including payment services and e-money businesses, will not be able to benefit from measures that are expected to be included in the government's Corporate Insolvency and Governance Bill.
Business Secretary Alok Sharma announced insolvency rules in March to help businesses hit by the pandemic, which are expected to be included in the proposed bill. The measures include halting legal action against a company that falls into insolvency amid the COVID-19 crisis.
But the FCA confirmed on Thursday that the safeguards will not apply to banks, insurers and other finance companies.
"These provisions will help to ensure that the U.K.'s existing special insolvency regimes for financial sector firms remain effective, and that financial market participants have the legal certainty so that financial markets function effectively," the regulator said of the proposed bill.
The proposed bill is also intended to prevent suppliers from withholding supplies from an insolvent company in a way that will jeopardize its efforts to save itself.
And the measures propose to temporarily exempt directors from personal liability if they continue to trade during the crisis if there is a risk of future insolvency — meaning that liquidators cannot take action over losses to creditors for continued trading.
But financial services companies are expected to benefit from some measures under the bill, the watchdog said.
Struggling banks and insurers will temporarily be exempt from winding-up proceedings when their unpaid debt is the result of the coronavirus crisis. And finance companies can hold virtual annual general meetings, even if they are under a legal duty under corporate and insolvency rules to do this in person.
The bill, which is sponsored by the Department for Business, Energy and Industrial Strategy, is due to begin its passage through Parliament shortly.
--Editing by Ed Harris.
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