The Government plans to suspend wrongful trading under Section 214 of the Insolvency Act 1986. There is fear in the Insolvency Profession that this blanket suspension could be abused. The profession favours a revision of those provisions with specific measures aimed at protecting retail, hospitality and rental property companies, who have been forced to close by the Coronavirus Act 2020. It is expected this will lead to relaxation/protection for those continuing to trade. The provisions of Section 214 of the Insolvency Act 1986 are to protect creditors when directors of a business knew or ought to have known that there was no reasonable prospect that the company would avoid going into insolvent liquidation. Directors will of course be worried about the consequences of continuing to trade amid the COVID-19 disruption, but good advice from an insolvency practitioner or insolvency lawyer should remove their risk of facing a wrongful trading action and such advice should be sought at an early stage.

Source: Kings Chambers