The suspension of wrongful trading provisions – again
The Government announced that from 26 November 2020, the suspension of wrongful trading provisions will be in place again having ceased on 30 September 2020, however there will be no retrospective cover.
This gap between the previous rules and the re-introduction, means that it is possible for Directors of businesses who went into liquidation between 1 October to 25 November, to be held liable for the business debts to creditors.
The ‘new’ rules are welcomed as it will protect directors from being held personally liable for the collapse of a business, which may not have happened were it not for the economic effects of the current pandemic.
HMRC preferential status
In addition to the above, HMRC will become a secondary preferential creditor in insolvency proceedings as of 1 December 2020. This change was due to come into effect from April 2020, but was delayed.
In essence this change means that HMRC will now be considered over unsecured creditors such as Banks and other lenders, to recoup outstanding debts from an insolvent business. Concerns have been raised that by moving lenders or banks further down the list to reclaim payments, appetite to lend may reduce and the terms imposed on lending will be less favourable.
For further information on wrongful trading provisions or HMRCs new status, please contact Michaela Johns on 023 8046 1256.