{"id":792,"date":"2020-04-06T15:34:08","date_gmt":"2020-04-06T15:34:08","guid":{"rendered":"https:\/\/www.chrishegarty.com\/?p=792"},"modified":"2020-04-06T15:34:08","modified_gmt":"2020-04-06T15:34:08","slug":"suspension-of-wrongful-trading-provisions","status":"publish","type":"post","link":"https:\/\/chrishegarty.com\/?p=792","title":{"rendered":"Suspension of "Wrongful Trading" Provisions"},"content":{"rendered":"\n

On 28 March 2020 the Secretary for Business, Alok Sharma, announced a suspension of the \u201cwrongful trading\u201d<\/a> provisions to allow businesses to keep going during this crisis.<\/p>\n\n\n\n

Legislation is yet to be set out but it will be retrospective to 1\nMarch 2020 and means that directors, who are often concerned about the\nliabilities they can accrue under these provisions, can keep businesses\ngoing without worry about being pursued later.<\/p>\n\n\n\n

Ordinarily wrongful trading arises when a director:

\u201cat\nsome time before the commencement of the winding up of the company, [\u2026]\nknew or ought to have concluded that there was no reasonable prospect\nthat the company would avoid going into insolvent liquidation or\nentering insolvent administration.<\/em>\u201d<\/p>\n\n\n\n

If made out (and subject to certain defences) then such a director\nmay be required to pay into the liquidation. This therefore circumvents\nthe limited liability of a company and provides a potential additional\nsource of funds in liquidation.<\/p>\n\n\n\n

Such a contribution may not be insignificant as the Court\u2019s view in Re Produce Marketing Consortium (1989) 5 B.C.C. 569<\/em><\/strong> was:

\u201cthe\n appropriate amount that a director is declared to be liable to\ncontribute is the amount by which the company\u2019s assets can be discerned\nto have been depleted by the director\u2019s conduct which caused the\ndiscretion under sec. 214(1) to arise<\/em>\u201d

However, then goes\non to point out that the words chosen are very broad and would not set\nout limits on that discretion. Questions of the extent of such\ncontribution have been quite strenuously argued and are open to\nchallenge.<\/p>\n\n\n\n

It must be noted that section 214 of the Insolvency Act<\/a> follows section 213 \u2013 and that concerns fraudulent trading \u2013 which occurs where:

\u201cany\n business of the company has been carried on with intent to defraud\ncreditors of the company or creditors of any other person, or for any\nfraudulent purpose<\/em>\u201d.<\/p>\n\n\n\n

The importance of section 213 and 214 together is that \u201cwrongful\ntrading\u201d does not need any fraudulent intent, merely the actions\nthemselves.<\/p>\n\n\n\n

This suspension is a welcome relief to allow directors who innocently trade whilst insolvent during this unprecedented crisis.<\/p>\n\n\n\n

Parliament has published Commons Briefing Paper 8877<\/a>\n which discusses the implementation of this and other, welcome,\ninsolvency reform which is being driven through to support UK\nbusinesses.<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

On 28 March 2020 the Secretary for Business, Alok Sharma, announced a suspension of the \u201cwrongful trading\u201d provisions to allow businesses to keep going during this crisis. Legislation is yet to be set out but it will be retrospective to 1 March 2020 and means that directors, who are often concerned about the liabilities they […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-792","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/posts\/792","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=792"}],"version-history":[{"count":0,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=\/wp\/v2\/posts\/792\/revisions"}],"wp:attachment":[{"href":"https:\/\/chrishegarty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=792"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=792"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/chrishegarty.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=792"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}