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COVID - 19 Update - Relaxation of the Law on Wrongful Trading - 30th March 2020 - Click for larger version COVID - 19 Update - Relaxation of the Law on Wrongful Trading - 30th March 2020

In these challenging times, the UK Government's daily Coronavirus update has become essential viewing, especially for those operating a business.

The Government are announcing changes to a variety of practices on a daily basis and the legislative pen is very busy, although naturally playing catch up with the rapidly changing landscape.

The business secretary announced on Friday 27th March 2020 that there will be a number of changes to the insolvency legislation to assist businesses. The broad theme is one of flexibility in a time of crisis.

Of particular interest is the relaxation of the law on Wrongful Trading. This practice is presently encapsulated in the Insolvency Act 1986 at s.214. The offence is effectively one of continuing to trade when the director knew or ought to have known that there was no reasonable prospect of the Company avoiding insolvent liquidation.

Clearly, in the present climate and with no accurate timeline for a conclusion, so many businesses (if not all) could arguably fall into this category.

The Government announced a "temporary suspension of wrongful trading provisions" thus removing the risk of personal liability on the directors who continue to carry on in this most difficult trading environment.

This will apply retrospectively from 1st March 2020 and is intended to be in place for at least 3 months.

It is likely that legislation shall follow and we suspect that anything will be widely drawn to allow the justiciary discretion, considering the obvious concern of abuse.

Nonetheless it is very welcome news for directors doing everything they can and taking difficult decisions in order to keep their business and in turn, the economy going.

Such swift legislative change and implementation of measures are vital and provides support and comfort to business owners at this ongoing period of uncertainty.

If you wish to discuss the impact of the above and the how the daily changes may affect your business, please do get in touch. Our Corporate Recovery team are on hand to assist with questions and provide advices.

Stay strong, Stay Safe.

Alan McKee:

alan@macdonaldhenderson.co.uk/ 07727 030 918

Michael Hankinson:

michael@macdonaldhenderson.co.uk/ 07786 135 023

Last updated: 4.26pm, Monday 30th March 2020

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