Deciding the parameters of directors' personal liability for actions, or omissions, when a company continues to trade while it is or near insolvent requires a balance to be struck between allowing directors latitude to try to rescue the company and protecting the company's creditors.

The Supreme Court has recently released a decision on directors' duties, which should serve as a timely reminder to all directors of their duties under the Companies Act in circumstances of insolvency. Continuing to trade while insolvent will be a breach of your duties, even if you believe that overall creditors may be better off or the extent of losses will be reduced. It is however welcome confirmation for liquidators that the Courts will enforce the provisions of the Companies Act based on the clear wording of these sections.

Many businesses are—or soon will be—unable to meet their obligations. Not all businesses in distress are unsuccessful; sometimes, as in the economic circumstances arising from the novel coronavirus (COVID-19) and the governmental directives tailored to address the related public health issues, even successful businesses must confront closures and steep declines in demand that could not have been anticipated, and may find it necessary or desirable to restructure their existing debt obligations.