In recognition of the exceptional financial circumstances that businesses are currently facing, the Government has announced a set of changes to the insolvency system for those companies undergoing restructure.
These changes are designed to give business owners more breathing space if their business is hit by the impact of the Coronavirus.
Business Secretary Alok Sharma announced on Sunday 29 March 2020, that struggling companies would be able to access supplies and raw materials whilst restructuring their finances.
In addition to this, the wrongful trading provisions have been temporarily suspended for three months with this measure backdated to 1 March 2020.
Previously, under the Insolvency Act 1986, boards had a strict duty to announce whether the company had stopped trading if the company was insolvent or if the insolvency could not realistically be avoided in the future, and company directors could be held personally liable for continuing to trade if they knew the business is facing insolvency.
Now as a result of the suspension, company directors will be allowed to continue trading without facing potential threat of personal liability for their decisions during this pandemic. However, it was made clear that all of the other checks and balances that help to ensure directors fulfil their duties properly will remain in force.