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Industry responds to wrongful trading suspension

Trade bodies and insolvency firms have given mixed responses to government moves to temporarily suspend the wrongful trading provisions, which take effect retrospectively from March 1.

The wrongful trading laws prevent a business from trading while insolvent. For three months from March 1, UK companies will now be able to continue buying supplies while attempting to find a rescue package. This “breathing space” will mean that company directors can keep their workers employed and businesses going.


Matthew Fell, chief UK policy director at the Confederation of British Industry (CBI) said: “The CBI welcomes these interventions at a critical time for business.”


“The temporary suspension of wrongful trading provisions, along with other measures, will give much needed headroom for company directors to enable otherwise viable businesses to use the government’s support package and weather this crisis.”


The British Chambers of Commerce (BCC) also agrees with these new measures. BCC head of economics, Suren Thiru, said: “It is right that the rules on wrongful trading are temporarily suspended. Companies that were viable before the outbreak must be supported to ensure they can help power the recovery when the immediate crisis is over.”


A spokesperson from PwC said: “The changes to the ‘wrongful trading’ guidelines should help alleviate much of the anxiety they may have been facing in relation to ongoing trading decisions."


The announcement has also been met with some apprehension. Duncan Swift, president of insolvency and restructuring trade body R3, commented: “The profession will have some serious concerns about the government’s plans to suspend wrongful trading.”


“A blanket suspension could risk abuse. The provisions are there for a reason and protect creditors.”


R3 cautions companies to seek professional advice, as does the ICAEW. An ICAEW spokesperson said: “This is a pragmatic move and a useful addition to the government’s strategy to protect employment and will definitely help some businesses survive. But we would encourage any directors with concerns about their company to seek professional advice at the earliest opportunity.”

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