COVID-19: Emergency Changes to the Insolvency Rules

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The changes?

 On Saturday, during the Government’s daily Coronavirus update, it was announced that it would shortly legislate to:

  • temporarily suspend wrongful trading rules under the Insolvency Act 1986, so that directors are not personally liable for doing as much as they can to save companies and jobs during the pandemic. This will apply retrospectively from 1 March; and
  • allow companies undergoing restructuring to continue to access supplies and materials under the proposed new rules.

It is intended that these measures will help alleviate potential cashflow issues and provide companies with very valuable time to ride out the crisis and be ready when it comes to an end, whilst ensuring creditors get the best return possible.

These measures have been well received by business and are examples of the way Government is going to take a more sympathetic and flexible approach to helping business in these unprecedented times.

The dangers?

Directors should not treat any new measures as carte blanche to act without considering their duties and all other checks and balances to ensure directors continue to fulfil their legal duties and obligations will remain in place as far as we are aware at present.


Liquidators will need to think carefully as to whether the new measures will apply to them now or indeed retrospectively, before bringing proceedings against former directors in the near future. For now, other provisions of the Insolvency Act 1986 may be a more fruitful avenue.


It is unlikely that the Government intends to extend these new measures to impact upon the misfeasance provisions contained in the Insolvency Act 1986, which relate to the misapplication of company money or property. Nor is it likely to apply to breach of fiduciary duties. It is important to note that both of these alternative remedies can be sought by any creditor or shareholder in a liquidation as well as the Liquidator of a company.


Concerns have already been voiced suggesting that these new measures will be abused but given that there are alternative ways to ensure directors remain accountable for their actions in light of insolvency, some of which are mentioned above, it is hoped and indeed more than likely that this would be the exception rather than the norm.

What’s next?

We await further announcements from the Government to see whether there are any more emergency changes to the insolvency rules and to provide more clarity on the specifics of the measures outlined above.

If you have any queries please contact Bryn Robertson, James Clarke or Ben Rutledge.

This update is for general purpose and guidance only and does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. No part of this update may be used, reproduced, stored or transmitted in any form, or by any means without the prior permission of Brecher LLP.