Although the contentious background to the applications to restrain the presentation of two winding up petitions heard together in (but only listed singularly as) the case of Shorts Gardens LLB v London Borough of Camden Council [2020] EWHC 1001 (Ch) is somewhat unusual, these cases nonetheless raise some interesting points of principle which may be used by the courts in determining whether it is appropriate to restrain or dismiss a winding up petition due to COVID-19.

As businesses and companies in the UK face an uncertain few weeks and months with unprecedented pressures, it can be easy for directors to panic and not know where to turn.

To assist in decision-making, we give a reminder of the law in this area, and some signposts for those seeking help.

In this briefing, we give a short reminder of statutory duties owed by UK directors under the Companies Act 2006, the potential risks of continuing to trade while possibly insolvent, and actions that should be taken in order to mitigate those risks.

Directors’ duties

Hot on the heels of our April 2020 article on the proposed reintroduction of the Crown preference, Parliament has recently approved legislation that will increase the ring-fenced amount available to unsecured creditors on an insolvency of a company from £600,000 to £800,000.

In our last article, which can be found here, we reported on the government’s intention to give HMRC priority in the recovery of certain debts (including VAT, PAYE, Employee NICs, and Construction Industry Scheme deductions ) in insolvency proceedings.

In the landmark decision in Re Systems Building Services Group Limited [2020] EWHC 54 (Ch), ICC Judge Barber held that the duties of a director survive the insolvency of a company.

Following consultations on insolvency and corporate governance in 2017 and 2018, the Government recently published its response setting out some notable proposed changes to the existing insolvency and corporate governance legislation. Following the high profile failures of Carillion and BHS, the Government’s response is largely aimed at encouraging the recovery of viable companies, improving transparency and promoting responsible directorship. This article will primarily look at the proposed changes focused on facilitating a rescue culture.

England has been the jurisdiction of choice for European restructurings. While other jurisdictions have sought to revamp their insolvency law in recent years in an effort to chip away at the English dominance in the restructuring arena, the lure of the tried and tested English legislation and judiciary means that the English system has remained dominant. In the wake of Brexit, will England lose its place as jurisdiction of choice?

In February 2016, Mr Justice Snowden handed down his judgment in the High Court proceedings concerning Ralls Builders Limited (in liquidation) [2016] EWHC 243 (Ch). This matter concerned an application by the liquidators of Ralls Builders Limited (in liquidation) (the company) for a declaration regarding the alleged wrongful trading of the company by its directors, under section 214 of the Insolvency Act 1986 (the Act).

From 1 January 2016, European Economic Area (EEA) member states are required to implement Article 55 of the European Union Bank Recovery and Resolution Directive (2014/59) (BRRD).

DTEK Finance B.V., Re [2015] EWHC 1164 (Ch)