Page 8 - BPIF inPRINT Issue 62

inDEPTH

Company directors now have a
legal minefield to navigate in these
very difficult times

legal KEEPING YOUR COMPANY

RUNNING – DO’S AND

DON’TS FOR DIRECTORS

As the UK Government has reacted to the unfolding COVID-19

pandemic, substantial measures have been put in place that are
intended to mitigate the effect on businesses and the wider economy.

hese rapid liabilities when they “knew, until 30 June 2020, and The COVID-19 pandemic
Tdevelopments, or ought to have concluded the new Bill indicates that is having a devastating
including legislation, there was no reasonable the period will be extended effect on the UK economy,
regulations and guidance, prospect of the company to either 30th June 2020, and businesses are
have for the most part been avoiding an insolvent or one month after the facing tough decisions
welcomed by the business liquidation." legislation comes into force, in unprecedented
community, but company The proposed change whichever is later. circumstances.
directors now have a legal to the law would mean Boards of companies
minefield to navigate as that when the court is Personal liability will need to make rapid
they continue to run their considering whether to The Government does not but well thought out and
companies in these very declare a director liable to want directors to be so documented decisions as
difficult times. contribute to the company’s concerned about personal the crisis develops.
Many directors will be assets under wrongful liability that they act
considering whether their trading provisions, it will pre-emptively in closing For further information
companies are strong not take into account losses businesses down in these on the duties of company
enough to survive the incurred during the period unusual circumstances, directors, please contact
economic downturn, and in which the business was where an increase in Nicola Langley,
whether they should carry suffering from the impact liabilities in the short-term Head of Legal, at
on business at all. of the pandemic. may enable them to trade [email protected]
The legislation necessary out of difficulties once the
Wrongful trading to bring about this change current crisis is over. For further guidance on
The Government has to the law on Insolvency This appears to be an HR & Legal, please visit
announced that it proposes is progressing through encouraging sign that www.britishprint.com/
to suspend certain sections Parliament in the form of the Government wants coronavirus
of the Insolvency Act The Corporate Governance business to continue, but
1986. This proposal would and Insolvency Bill, and is it should not be seen as
mean that directors would likely to be enacted before an invitation for directors
avoid personal liability the end of June 2020. to disregard the usual
for Wrongful Trading. The original proposal considerations when
The current law says that was that directors will not deciding to incur liability or
if a company goes into be held liable under this take on more debt.
insolvency, a liquidator provision in relation to Directors need to remain
can apply to the court for actions taken from the 1 cautious in their actions
an order that directors March 2020 to 31 May 2020. because the requirement to
contribute to the pot of On 14 May 2020, the UK follow common law duties
money available to pay out Government extended the and other provisions of
to creditors if the directors temporary suspension of the Companies Act will
have carried on incurring wrongful trading liability continue to apply.

8