Directors and insolvency due to coronavirus

A recent survey by the British Chamber of Commerce has suggested the majority of firms face a cash flow crisis. Therefore the new legislation introduced by the government to protect directors and insolvency due to coronavirus is a welcome move. 

Directors and insolvency due to coronavirus

The new rules for directors and insolvency due to coronavirus

The government announced that the wrongful trading and insolvency rules are to be temporarily suspended. They have been backdated to take effect from 1 March 2020. There will be legislation introduced in Parliament at the earliest opportunity to implement these changes with the possibility of extending these rules if appropriate.

What are the existing rules?

Under the existing wrongful trading legislation the following applies:

  • As a director, you should not allow your company to continue to trade whilst you are knowingly insolvent
  • If you do trade whilst insolvent you have the potential to become personally liable for your company’s debts, including amounts due to HMRC
  • A director should, in the event of potential insolvency, contact an insolvency practitioner and be very careful not to pay one debt in preference to another unless advice has been sought.

The relaxation in the wrongful trading rules is designed to provide companies with a breathing space so that they can explore options for a rescue.

Should I close my company down?

It is highly likely that many businesses will suffer a decline in their turnover during the period of lock down enforced by the coronavirus pandemic. The government has offered far reaching supporting for businesses that have been impacted by coronavirus which includes the following:. 

The relaxation of the wrongful trading rules will allow you time to consider these options. However if after exploring all of these opportunities you consider the business cannot continue we would recommend you seek the advice of a licensed insolvency practitioner.

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at richard@tfaaccountants.co.uk.

Spread the word!

Why Friendly

The Friendly Accountants are Alternative Accountants. Unlike traditional accountants, we look forward - not back.

We work with small businesses and contractors/freelancers who want to embrace the world of online software and the benefits this brings.

So if you'd like to find out more, just give a call or drop us an email - no hard sell.

Just friendly, professional advice!

Who we are

We're a husband and wife team with over 50 years experience of working with small businesses.

So we're in a unique position to understand the challenges that you face every day in your business.

And what's more, we're fully professionally qualified so you can be sure that your affairs are in safe hands.

Copyright 2016 by TFA Accountants Limited