
The failure to extend the suspension of “wrongful trading” rules could put further pressure on hospitality and leisure businesses already facing an uncertain future due to tightened coronavirus restrictions, the organisation said. It applies to directors and (former directors) of companies that have entered into liquidation or administration (which in this article we will refer to as insolvency proceedings) and who allowed the company to continue to trade when they knew, or ought to have been aware, that the company could not avoid insolvency proceedings. Continuing to trade when there was no reasonable prospect of avoiding.
The suspension of wrongful trading included in the Corporate Insolvency and Governance Bill is a temporary measure. What is wrongful trading? Can a director be charged with wrongful trading? Is wrongful trading a criminal offence?
Wrongful Trading rules makes it an offence for a company director to continue to trade if that person knows that the business is unable to avoid going into insolvent liquidation. The purpose of the wrongful trading rules is to stop directors continuing to trade companies beyond the point of no return. Flexibility is, however, already built into the wrongful trading rules.
The current wrongful trading provisions mean that company directors can face personal liability if they fail to take account of the impact on creditors in a situation where trade is continued.




