It has been a difficult start to the year for many D&Os. Data from the Insolvency Service released earlier this month confirmed that the number of companies entering a voluntary insolvency process has more than doubled in the first quarter of 2022 (a 112% increase) compared to the same period in 2021. This is the highest number of company voluntary liquidations since records began in 1960.

In our December 2021 article (found here) we looked at the temporary protection afforded by the government to directors of companies whose viability was threatened by the Covid associated downturn. Many directors of Covid-hit businesses would have toyed with the idea of placing their companies into an insolvency proceeding to protect themselves from the personal liability that comes with an unsuccessful attempt to trade through (and out of) financial difficulties.

When Covid hit in March 2020 and the country went into lockdown with an associated dip in economic activity and consumer confidence, the viability of many small and medium sized enterprises was called into question. Many directors will have had cause to consider their obligation to place their company into an insolvency proceeding in order to insulate themselves from personal liability, and in particular liability for wrongful trading (continuing to trade when they knew or ought to have known there was no reasonable prospect of the company surviving).