25th September 2020

Alongside the Chancellor’s announcement yesterday of changes to the financial support package being provided for businesses, in particular the withdrawal of the furlough scheme for employees to be replaced by perhaps the understandably less attractive Job Support Scheme,  the Government also announced amendments to and the extension of certain provisions of the Corporate Insolvency and Governance Act 2020 (“CIGA”) which was introduced in May 2020. We covered this in our eshot titled “Coronavirus Even Changes The Insolvency Act” on 26 May 2020 and we have copied the eshot below.  The provisions which have been extended include the continued prevention of winding up petitions being issued until 31 December 2020 (which will make it difficult for suppliers to pursue unpaid debts) and the exemptions for small companies from the obligation to provide continued supplies to a customer who enters a formal insolvency procedure.

However, the most noteworthy point to arise from the changes yesterday is perhaps an omission, namely that there has been no extension to the suspension of  the wrongful trading provisions (the risk of personal liability for certain of a company’s liabilities for directors of companies which enter insolvent liquidation) which was in place from 1 April 2020 until 30 September 2020 and it was widely expected that this suspension would be extended for a further period. However this is not the case and therefore from 1 October 2020 directors will now once again be at risk for a claim for wrongful trading if they allow a company to continue trading past the point that there was no longer a reasonable prospect of avoiding insolvent liquidation.

It is our view that in these increasingly uncertain times, particularly with the further lockdown restrictions introduced by the Government this week, it will be very difficult for directors, particularly in certain sectors, to have certainty that their company can continue to trade and pass the “reasonable prospect” test without taking great care and with appropriate professional advice.

If you have clients who have any concerns around this topic or any of the provisions of the CIGA,  then please do not hesitate to give one of us a call to discuss further.
Robert Keyes                       07500 933022 / [email protected]
Gareth Roberts                   07979 706392 / [email protected]
Paul Ellison                         07967 471211 / [email protected]
David Taylor                       07855 231103 / [email protected] 

For any further information on our services please do not hesitate to give one of us a call.