Corporate Insolvency and Governance Act 2020—temporary changes to the wrongful trading regime
Corporate Insolvency and Governance Act 2020—temporary changes to the wrongful trading regime

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Corporate Insolvency and Governance Act 2020—temporary changes to the wrongful trading regime
  • What is the background to the temporary changes to the wrongful trading regime?
  • The wrongful trading regime
  • The Corporate Insolvency and Governance Act 2020
  • The original suspension (1 March 2020—30 September 2020)
  • The revived suspension (26 November 2020—30 June 2021)
  • The nature of the temporary changes
  • Directors’ disqualification
  • Practical implications

What is the background to the temporary changes to the wrongful trading regime?

The coronavirus (COVID-19) pandemic and the resulting lockdowns and social distancing measures introduced by the UK Government continue to have a crippling effect on many businesses and the economy overall. When the original national lockdown was announced in March 2020, the Government introduced a package of legislative and financial support measures designed to assist businesses and keep large parts of the private sector on life support. As part of the legislative reforms, the Corporate Insolvency and Governance Act 2020 (CIGA 2020) received Royal Assent on 25 June 2020. For further information on CIGA 2020, see: Corporate Insolvency and Governance Act—overview. For further information on coronavirus for restructuring and insolvency professionals, see: Coronavirus (COVID-19)—Restructuring & Insolvency—overview.

Directors of companies in financial difficulties are presented with many practical and legal concerns, including the risk of personal liability. One of the key concerns for directors is usually the threat of liability for wrongful trading under section 246ZB of the Insolvency Act 1986 (IA 1986) (in the context of insolvent administration) and IA 1986, s 214 (in the context of insolvent liquidation). While there is no offence of trading while insolvent under English law, directors and shadow directors of companies that go into insolvent administration or insolvent liquidation can be liable to make a personal contribution to

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