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Watch out! Wrongful Trading is Back – Other pleasures deferred

Yesterday, the Government announced that some of the Covid-related provisions in the Corporate Insolvency and Governance Act 2020 (CIGA 2020) would be extended. For those interested, the extension regulations are SI2020/1031 and you can find them here.

The most significant omission is the continuation of the suspension of liability for wrongful trading. To remind you, CIGA 2020 suspended until 30 September 2020 a director’s liability for wrongful trading if her company was Covid-insolvent. This was an important distinction – if your company is insolvent for reasons unconnected with the pandemic, you are not, and have never been, exempt from liability.

The Government has also extended the period within which you cannot rely on a statutory demand as the basis of a winding up petition, and the period within which you can apply to wind up a company that is Covid-insolvent.

Helpfully, the new regulations provide three different extension dates for four different Covid measures.  These are set out in the table below:

The Covid Measure Where do I find it? New date

Restrictions on Stat Demands and winding up petitions

Stat demands served between 01.03.20 and 31.12.20 can never be relied on to support a winding up petition. Nor can you serve a stat demand at the end of 2020 and hold it over into 2021. This applies to all companies, not just those that are Covid-insolvent.

No winding up petitions between 27.04.20 and 31.12.20 unless the company would anyway be insolvent without Covid-impact.

Sched 10 para 1 CIGA 2020 31.12.20

Dispensation from validation orders

No need to apply for validation orders if the company is subject to a winding up petition between 27.04.20 and 31.12.20

NB all companies – not only those that are Covid-insolvent

Para (1) and (2) Sched 10 CIGA 2020 31.12.20

Company meetings

Relaxation of usual rules on EGMs/meetings and voting extended

Sched 14 CIGA 2020 30.12.20

Small suppliers can continue rely on “Ipso facto” clauses if their customer becomes insolvent

Small suppliers are not obliged to continue supplying to customers who become insolvent

S15 CIGA 2020 and s233B Insolvency Act 1986 30.03.20

Covid-moratorium regime is extended

BUT – watch this space. Some of these extensions are about to be cancelled/modified. The Government has not published details yet. Talk to an insolvency practitioner. This is complicated!

S1 and schedule 4 CIGA 2020 and Part A1 and Schedule ZA1 Insolvency Act 1986 31.03.20

These extensions and regulations are complicated. If you have any questions, please contact our team on 01737 854500 or email [email protected]


Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.

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