Wrongful Trading suspended again from today and just in time for Black Friday! In addition, it has been announced that the government intends to reinstate the temporary suspension of the use of statutory demands and winding-up petitions until 31 March 2021.
Initially, Wrongful Trading was suspended for a period of time earlier this year until the end of September and then the suspension lapsed.
However, the legislation laid before Parliament with the usual short notice to which we are now accustomed kicks into effect today.
What Is Wrongful Trading Suspended Again All About?
We put out a post on 18 October 2020 “Wrongful Trading is Back!” to refer to the fact that the suspension of Wrongful Trading, which is set out in Section 214 of the Insolvency Act 1986, had ceased.
However, now Her Majesty’s Government has decided that starting tomorrow, another period of forgiveness is going to be afforded to Directors lasting until 30 April 2021 in light of Section 2 of The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020.
What Does This Mean?
It means that calculating the loss suffered by a company when there has been Wrongful Trading is now going to be conceivably the subject of some potentially remarkable calculations and potential debate.
If a company’s books and records are in disarray, then how is a liquidator going to be able to reliably calculate losses incurred by Directors who should have stopped trading at an earlier juncture?
The potential for ever more complicated and therefore costly disputes arising from bringing Wrongful Trading litigation is going to conceivably make it a rather unattractive claim for a liquidator to pursue. Even some of the most meritorious Wrongful Trading claims could have added difficulties.
Wrongful trading is a very common event in build up to insolvency by an insolvent company. However, as a piece of insolvency litigation wrongful trading is perhaps likely for the time being to be more unattractive for a liquidator to bring than ever before. It was hardly front of the queue before these regulations came into effect in any event.
Director Duty
A notable point, however, is that Directors’ duties remain notwithstanding this renewed period of suspension and therefore a Director perhaps ought not rely upon it with too much alacrity as a ‘get out of jail free card’ where Wrongful Trading liabilities might be concerned.
As with any insolvency issue obtaining professional advice at the earliest stage is crucial and can be the difference between rescuing a business and its closure, as well as safeguarding against the wider impact of Director liability.
So if any doubt Act Now! Call us on 020 3925 3613 and speak to our CEO, Elliot Green for a Free Initial Consultation to consider your options.
This post “Wrongful Trading Suspended Again” is not legal advice and not to be relied upon as such. No liability is accepted for any reliance placed upon it. It is provided for information purposes only. You should take independent professional advice based on the facts of your case.
