2020 was a difficult and uncertain year, with unprecedented challenges across the globe, changing the world as we know it. At the start of 2021, the country remained in lockdown and Brexit materialised - with a deal - posing a further seismic shift. It remains unclear what the full effect of either will be on the economy. On the plus side, the active vaccination programme may offer us a route out of the pandemic. But one thing is clear, lawyers are resilient and our flexible fee structures and case funding options prove more important than ever. We are here, ready to help.

The new Temporary Insolvency Practice Direction gives much-needed clarity for insolvency proceedings in the Business and Property Courts during the COVID-19 pandemic.

General provisions

As noted in our previous Perspectives Article, in March 2020, the UK Government announced the suspension of the wrongful trading provisions contained in s.214 of the Insolvency Act 1986.

In March 2020 the UK Government announced the suspension of the wrongful trading provisions contained in s.214 of the Insolvency Act 1986. Those provisions impose personal liability on directors found to have over-traded while a company was insolvent. By removing the risk of personal liability, the Government sought to provide directors with the personal protection they required to allow their businesses to continue trading through the pandemic.

In light of the ongoing COVID-19 pandemic, on 28 March 2020, the Government announced the suspension of s.214 of the Insolvency Act 1986. This section imposes personal liability on directors found to have over-traded while a company was insolvent (so-called ‘wrongful trading’). By removing the risk of personal liability, the Government is providing directors with the personal protection they need to allow their businesses to continue trading through the pandemic. There are, however, likely to be negative consequences arising from the suspension, including for creditors.