Wrongful trading suspension 're activated' by UK Government leaving directors with a 2-month "gap" in protection during COVID 19 pandemic


Today, new legislation comes into force* that provides directors of companies in financial difficulty with a second breathing space from the financial impact of the wrongful trading provisions.

Previously not extended alongside the other temporary insolvency provisions back in September 2020 (because of a technicality with dates apparently) and left to expire, the UK government has now renewed the suspension of wrongful trading liability for directors, originally in place from 1 March 2020 to 30 September 2020 by creating a second suspension of this liability to apply between 26 November 2020 and 30 April 2021 (but with no retrospective effect).

In deciding whether a director should make a financial contribution to the assets of a company in financial difficulty, a court would need to consider only behaviour before 1 March 2020 and between 1 October 2020 and 25 November 2020 as potentially objectionable.

The new legislation also further extends the temporary modifications to the processes of corporate meetings until 30 March 2021.

You can read Dentons' updated materials here:

Ten Top Tips for UK Boards

Directors duties/moratorium article

General CIGA article

Temporary Insolvency Provisions Table

*The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020

Original Article