Further to our update to the existing insolvency laws, whilst it appears from the recent government announcement that UK wrongful trading provisions may be retrospectively relaxed from 1 March for a three month period, directors should continue to have regard to their individual conduct, particularly given the increase of claims funded by the growing litigation funding market.

  • There are as yet no firm details regarding relaxation of personal liability for wrongful trading, but rather only an indication by HMG as to what is intended. Directors will bear the risk for any conduct that may amount to wrongful trading up to any retrospective legislation that may be imposed from end of April onwards. Even then it is likely that any relaxation of personal liability with respect to wrongful trading will be evidentially linked to direct impact of COVID-19, meaning that directors will not simply have carte blanche to continue trading in any circumstances.
  • Directors are still at risk of misfeasance provisions – this means that liquidators can bring summary proceedings for breach of fiduciary duties.
  • Directors are still at risk for fraudulent trading provisions under section 213 of the Insolvency Act.  Therefore, directors are still at risk of recourse to if they knowingly carried on a business with the intent to defraud creditors or for any fraudulent purpose.
  • Directors of a company which is in the zone of insolvency owe duties primarily to creditors rather than the company’s shareholders.  Directors will need to consider their position carefully and take professional advice and record their decision-making to demonstrate that account has been taken of creditors’ interests when making major decisions.
  • The directors’ disqualification rules still apply.  If a director or former director of an insolvent company is found to have engaged in conduct which makes him “unfit”, he must be disqualified or have a disqualification undertaking accepted.  Other legal provisions will continue to apply – transactions at undervalue, transactions defrauding creditors, preferences, among others.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Photo of Elisabeth Baltay Elisabeth Baltay

Elisabeth Baltay is a partner in the Firm’s European Restructuring Group.

Elisabeth represents clients in complex multi-jurisdictional financing and alternative capital financing, restructurings, real estate and asset financing, public to private financing, project finance, and secured syndicated corporate lending. Advising a broad range…

Elisabeth Baltay is a partner in the Firm’s European Restructuring Group.

Elisabeth represents clients in complex multi-jurisdictional financing and alternative capital financing, restructurings, real estate and asset financing, public to private financing, project finance, and secured syndicated corporate lending. Advising a broad range of asset management clients, her primary focus is advising distressed and private credit funds. In addition, she represents financial institutions and corporates in connection with their restructuring activities and advises clients in the real estate acquisition space.

In 2018, Legal Business recognized Elisabeth as a “Significant Player” for leading female finance experts in London.

Photo of Andrew Wingfield Andrew Wingfield

Andrew Wingfield is a partner in the Corporate Department and a member of our Private Equity Mergers & Acquisitions Group. As businesses globally are impacted by the Coronavirus (COVID-19) pandemic, Andrew is a member of the firm’s Coronavirus Response Team helping clients respond…

Andrew Wingfield is a partner in the Corporate Department and a member of our Private Equity Mergers & Acquisitions Group. As businesses globally are impacted by the Coronavirus (COVID-19) pandemic, Andrew is a member of the firm’s Coronavirus Response Team helping clients respond and solve issues across myriad fronts.

Andrew undertakes a broad range of domestic and cross-border corporate and commercial work for both corporate and private equity clients, advising on acquisitions and disposals, joint ventures, mergers and public takeovers, flotations and equity capital markets and private equity investment.

He is called upon by financial institutions, private equity houses, management and corporates to lead on complex and high-value transactions. Andrew has a very strong financial institutions practice and is recognized by Chambers UK and Legal 500 as the “go to regulatory M&A lawyer” for regulated institutions such as banks, lenders, payment providers, insurance companies, wealth managers or other financial institutions transactions.

In addition, Andrew is recognized as a leading individual in the corporate/M&A: upper mid-market and premium deals category in The Legal 500 and clients note he is “pragmatic and knowledgeable.” In Chambers UK, Andrew is noted as “dynamic and commercial” and for providing “tailored, practical advice,” and is recognized in the corporate/M&A: mid-market category.