DATED: 30 MARCH 2020
On 28 March 2020 the Business Secretary, Alok Sharma, announced that wrongful trading rules will be suspended for a period of three months (applying retrospectively from 1 March 2020), as a measure to assist businesses in weathering the current storms.
Wrongful trading provisions, contained within UK insolvency law, can impose personal liability onto company directors who continue to trade whilst knowing that there is no reasonable prospect that the company will avoid going into liquidation.
This measure seeks to reassure directors that during these difficult times they will not be held personally liable if they are unable to minimise potential losses to creditors. This aims to prevent businesses from filing for insolvency prematurely due to the exceptional impact of coronavirus (recognising that for many businesses cash flow has and will become a pressing concern).
The government hopes that by introducing this temporary flexibility directors will be reassured that they can use their best endeavours to continue trading during these turbulent times, ensuring that as many businesses and jobs are protected as possible.
Alok Sharma did however warn that “all of the other checks and balances that help to ensure directors fulfil their duties properly will remain in force”. If you are in any doubt of your obligations or duties please contact Chris Brightling who would be happy to advise.
Whilst the details of the announcement require fleshing out, this temporary relaxation on wrongful trading rules will no doubt provide some confidence to directors in these unprecedented times.
For legal guidance on this and other issues your business may be facing, please contact Chris Brightling, Head of Corporate & Commercial
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