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Directors Beware! - news article image

Directors Beware!

26 Nov 2020

1 minute read

Most people know that in March 2020, the Government announced a suspension of Wrongful Trading Rules. This was part of a wider package of measures to aid businesses, and their boards, experiencing financial distress due to Covid-19.

The Bill temporarily removed the threat of personal liability arising from wrongful trading for directors who continued to trade a business through the crisis with uncertainty that the company would be not able to avoid insolvency in the future.

The suspension of wrongful trading ended on 30 September 2020 but has been reinstated again as of today until 30 April 2021. Some clarity will be needed as to whether actions and decisions by directors in the intervening period, between1 October and 25 November 2020 should be looked at under the usual wrongful trading scrutiny. 

A lot of noise was made about the suspension when it was originally enacted, but not about it ending at 30 September, and not about it being reinstated today.

More importantly though, and as I am sure my fellow Insolvency Practitioners (“IPs”) will agree, many have lost sight of the fact that the other “checks and balances” on directors and their duties remain in place. Most commonly, IPs consider Breaches of Fiduciary Duties, Preference Payments and Transactions at Undervalue. If you or your client are not sure what these are, how do you know they are not taking place?

From conversations I have had with company directors and their advisors there is confusion, or at least uncertainty, as to whether some of the decisions during these last nine months could ultimately be an issue for company directors should their company fail in due course, and let’s face it, they have all had to make tough and sometimes quick decisions. 

If you or your clients have any concerns, please get in touch for a chat.

Directors Beware! - news article image

Author:

Karyn Jones

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