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Change is on the horizon - but will it make a change?

Simeon Gilchrist and David Fendt consider the likely effect of the relaxation of the wrongful trading rules proposed in the recently published Corporate Insolvency and Governance Bill, and also consider the use by insolvency practitioners of what has been dubbed the “light-touch” administration regime.

Insolvency Practitioners (IPs) will no doubt be aware that as part of the Government’s response to the coronavirus pandemic it intends to amend UK insolvency law with a view to protecting the economy once the lockdown ends. The proposed legislation - the Corporate Insolvency and Governance Bill - was laid before Parliament on 20 May 2020 and is being debated and is expected to be enacted in the coming weeks.

A headline feature of the Bill is the suspension of wrongful trading laws for losses incurred to the company or creditors during the (as currently drafted) period of 1 March to 1 June 2020 (or one month after the Bill comes into force, whichever is later). Whilst this is commendable, one queries the practical utility of such a change. IPs will be well aware that wrongful trading is only one aspect of the Insolvency Act 1986 (IA 1986) whereby directors can be personally liable. Actions for misfeasance, unlawful dividends, fraudulent trading, undervalue transactions, preferences, and transactions to defraud creditors still remain firmly in place, as do common law claims such as breach of trust.