Corporate Insolvency Bill 2020: game-changer for company insolvency?

Discussion in 'Insolvency' started by eteb3, Jun 22, 2020.

  1. eteb3

    eteb3 UKBF Regular Free Member

    196 30
    See here for a summary of the changes. Highlights:

    The Bill:
    • Temporarily removes the threat of personal liability for wrongful trading from directors who try to keep their companies afloat through the emergency.
    • Prevents suppliers being able to rely on contractual termination clauses or other contract terms to stop the supply of goods or services to a company or to vary the terms of a contract when that customer goes into an insolvency procedure
    It is important to note that whilst the Bill still requires secondary legislation before it can come into force, the Court is likely to seek to rely on this Bill now, especially in insolvency cases.

    AuthorCatherine Rickett, Roythornes Solicitors
    Posted: Jun 22, 2020 By: eteb3 Member since: Jul 18, 2019
  2. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    3,523 448
    Personally I don't think its's a gamechanger.

    Wrongful trading claims are rare - they haven't suspended the other, easier claims, we can bring against Directors like illegal preferences and misfeasance which are more common.
    Posted: Jun 23, 2020 By: Lisa Thomas Member since: Apr 20, 2015
  3. Gavin Bates

    Gavin Bates UKBF Enthusiast Free Member

    668 136
    I agree with Lisa, they are normally a number of claims that are easier to pursue and prove before looking at wrongful trading.

    I have no doubt that claims will come forward and directors will suggest how were they to know they would have to deal with COVID19 and it will be interesting to see what the courts do with that.

    Therefore for me, any wrongful trading claims would have to be in the period before COVID hit over a long time afterwards and when they have some post COVID trading history behind them
    Posted: Jun 23, 2020 By: Gavin Bates Member since: May 9, 2016
  4. eteb3

    eteb3 UKBF Regular Free Member

    196 30
    Thanks, both: interesting.

    And on this bit:
    This seems to force suppliers to make a what is almost a gift to the company, given the very small hope of ever being paid. Or is that not what's going on?

    By the by, any thoughts on whether this is a further entrenchment of the advantages of Ltds over sole traders? (Which to me feels regressive: not only do companies and their owner-managers pay less tax than a sole trader - they can also externalise their risks while taking the upside, with society at large carrying the can.)
    Posted: Jun 23, 2020 By: eteb3 Member since: Jul 18, 2019