HFMC Wealth – Suspension of director liability for trading
If you’re the director of a business that is struggling to continue during the coronavirus pandemic, new measures announced on the 28th March by the Business Secretary should provide reassurance.
Under English law, a company director can be found personally liable for the losses suffered to creditors as a result of their company continuing to trade even in the face of unavoidable insolvency. This can lead to a court ordered contribution to the assets of the insolvent company.
As part of the measures recently announced by the government, restrictions around wrongful trading are to be suspended retrospectively from 1st March for an undefined period.
This news is likely to be a relief if you’re a company director whose business is struggling as a result of contract cancellations, supply chain issues, staff illness and the other pressures currently contributing to the hostile trading conditions.
As a director, if you continue to trade in this period knowing that your company faces insolvency, you will not be penalised for doing what you can to keep your business afloat.
The British Chamber of Commerce welcomed the suspension of wrongful trading rules, adding: “Companies that were viable before the outbreak must be supported to ensure they can help power the recovery when the immediate crisis is over.”
Further measures, including protection against winding-up petitions issued by creditors, have not yet been unveiled. However, these are anticipated as the government continues its efforts to prevent mass insolvencies and the corresponding rise in unemployment.
If you have questions about what this means for you as a director or have concerns around the impact of Covid-19 on your business please contact your usual HFMC Wealth contact. Alternatively, email firstname.lastname@example.org for more information.