The changes?

On Saturday, during the Government’s daily Coronavirus update, it was announced that it would shortly legislate to:

The UK Government has announced changes to the existing UK insolvency laws in order to ease pressure on companies and give them breathing space to trade through the COVID-19 pandemic.

On Saturday 28 March, Secretary of State for the Business, Energy and Industrial Strategy, Alok Sharma, announced a proposal for the urgent reforms to UK insolvency law, designed to protect companies and their directors during the COVID-19 outbreak.

Wrongful Trading (section 214 Insolvency Act 1986)

It was announced that there would be a temporary suspension of section 214 Insolvency Act 1986 in relation to wrongful trading.

When is a director a director? At first glance this may appear to be a facile question. Why would individuals who only carry the title “director” fall within this group? Surely a director must be someone who has been formally appointed as a director?

Well, yes and no. For instance, someone who is involved in the day to day management of a business, but has not been formally appointed as a director or someone who tells the board what to do may also be considered to be a director for the purposes of company law.

This client alert summarises the recent announcement by the UK government concerning reforms to UK insolvency law to help struggling businesses, being:

The government has responded to intense pressure from the restructuring and insolvency community by announcing measures to 'protect companies hit by COVID-19'. Insolvency law will be amended 'to give companies breathing space and keep trading while they explore options for rescue'.

Fraser Turner Limited v PricewaterhouseCoopers LLP and others [2019] EWCA Civ 1290

The Court of Appeal has upheld a decision striking out claims against administrators which alleged that they owed a duty to a specific creditor and were guilty of misfeasance.

Fraser Turner Limited (FT) was party to an agreement (“Royalty Agreement”) with London Mining plc (“LM”) and London Mining Company Ltd (“LMCL”) which provided for FT to receive a royalty in respect of iron ore produced at the Marampa mine. LMCL was a wholly owned subsidiary of LM.

The BEIS press release does not give much more by way of detail. However the notes to the release state:-

On 28 March 2020 the Secretary of State for BEIS, Alok Sharma, announced that changes would be made to the UK insolvency laws to help companies "…emerge intact the other side of the COVID-19 pandemic…to give them extra time and space to weather the storm and be ready when the crisis ends whilst ensuring creditors get the best returns possible in the circumstances".

On Saturday 28 March, the Secretary of State for Business Energy and Industrial Strategy announced changes to the insolvency regime with the aim of keeping viable companies trading through the unprecedented challenge of the COVID-19 pandemic.