The Business Secretary, Alok Sharma, has today announced a temporary suspension of the wrongful trading rules under the Insolvency Act 1986 to remove the threat of directors incurring personal liability during the COVID-19 pandemic. The change in law, which the government has said it will legislate for at the earliest opportunity, will apply retrospectively from 1 March 2020.

All other checks and balances to ensure directors continue to fulfil their legal duties and obligations will remain in place.

The suspension of wrongful trading will apparently form part of a range of measures to be introduced to improve the insolvency system for struggling companies during this difficult time, to help them emerge intact on the other side. The overriding objective will be to help companies to keep trading, by providing them with extra time and space to weather the current storm. The detail is awaited.

Other changes to ease the burden of regulation on companies during this challenging time have already been introduced. See, for example, Legal update, COVID-19: three-month extension to file accounts with Companies House. Alok Sharma said that further extensions under the Companies Act 2006 will be provided, if needed.

Source: Downing Street press conference, 28 March 2020.