U turn if you want to – CIGA is for turning

I recently wrote a blog on the return of wrongful trading pursuant to the provisions of section 214 of the Insolvency Act 1986 (“IA 1986”).

In summary, a director may be guilty of wrongful trading where they “knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation”.

The Corporate Insolvency and Governance Act 2020 (CIGA) is a fickle beast and has once again changed its spots. From 26 November 2020, the moratorium (s. 12 CIGA) on wrongful trading action will be revived and will remain in place until 30 April 2021.

It is unusual that there has been a pause between the previous moratorium ending and this new one beginning and it was explained in a memorandum that prolongation was not possible as the original moratorium had already ended. This means the new moratorium will not have retrospective effect and thus assessment of wrongful trading must focus solely on events occurring before 1 March 2020 (when the original mortarium came into force) and between the period 1 October 2020 and 26 November 2020 (between the original moratorium ending and the new starting).

Despite this peculiarity, the return of the moratorium is generally well received and will allow breathing space for directors of companies in distress.

If you are concerned about your business and need insolvency advice, please contact me or a member of our  Insolvency Team.