Under English law, there is no common law right to terminate a contract on a counterparty’s insolvency. As a result, in all well-drafted commercial contracts it common to see a contractual right to terminate on the event of a party’s insolvency.

The Government has announced proposals for retrospective changes for the urgent reforms to UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.

Wrongful trading

These changes will include a temporary suspension (to the end of June 2020) of section 214 Insolvency Act 1986 in relation to wrongful trading, subject to passage of the upcoming Corporate Insolvency & Governance Bill through Parliament in the coming weeks.