b'G & K See us on:SUSPENSION OFIn response to the current crisis wrongful trading has been suspended for three months with retrospective effect from WRONGFUL TRADE1st March 2020. This step incentivises directors, in such circumstances, not to commence insolvency proceedings and What is wrongfulcontinue to trade and potentially incur further liabilities. This trade?suspension offers directors limited protection.Once a directorAre these changes to the wrongful trade rules the best way of a companyof relaxing this complicated area of law? The existing wording concludes (or shouldof the (unamended) wrongful trade legislation does not seek have concluded)to penalise directors who have acted conscientiously and that there is noreasonably, weighing up their decisions and taking advice reasonable prospectfrom professionals. of the company avoiding a formal insolvency they have anOther insolvency legislation remains. Such as preferences, obligation to act diligently and minimise potential lossestransactions at an undervalue, misfeasance and much to the company creditors. If they dont, they run the risk ofmore. Watch out!incurring personal liability for any increases in the losses. G & KNEW PROPOSED MORATORIAM PROCEDUREshould bring about a better result for the creditors. Ifthere isnt the company should simply enter an insolvency procedure (creditors voluntary liquidation,administration of company voluntary arrangement)without delay and unnecessary cost.An insolvency practitioner (IP) is to monitor the process.Early involvement of the IP is essential.The moratorium comes into force when the relevantdocuments are filed in court.This will bring in a new procedure that was underThis procedure suspends any creditor actionsuch as consideration before the present economic crisis. lease forfeiture, winding up order made or petitionA moratorium would provide a breathing space to a companypresented, court writ procedure etc.under financial stress where creditors could not take anyThe initial period of the moratorium is 20 business days piecemeal action against the company. This breathing spacecommencing on the day after the moratorium comes intowould give the company time to implement a rescue plan suchforce and can be extended.as a restructure or refinance that would enable the company toThe company will not be able to obtain credit over 500 emerge from the moratorium as a going concern. without notifying the lender that a moratorium is in place The major points are;(during the moratorium period).There is no need for a formal insolvency procedure. During the moratorium the IP monitor must assessAvailable for companies that are insolvent or likely to continuously the companys affairs and be satisfied that thebecome insolvent. rescue of the company as a going concern remains likely.It is a Court processthe court may make an order thatOn the face of this it appears to be a useful tool. the company should be subject to a moratorium, or mayParticularly with a smaller company, are they likely to secure make any other order the court thinks fit. finance or bring about a reconstruction when in a moratorium? The court must be satisfied that a moratorium would Presumably, they would have tried before the moratorium. achieve a better result for the creditors as a whole thanThere would need to be a very clear plan put together with an would be likely if the company were wound up (without exit strategy. Effectively not being able to take credit and the first being subject to a moratorium). responsibilities placed on the monitor does put the directorsThere has to be a genuine reason why a moratorium in a fairly tight straight jacket.Well see. G & KFor advice on insolvency issues call us on your local number opposite www.griffinandking.co.uk | email: janet.peacock@griffinandking.co.uk'