Coronavirus - Changes to the Insolvency Rules

30 March 2020

Over the weekend, the Government announced further measures designed to support businesses through the COVID-19 crisis. These included the welcome news that the wrongful trading rules will be relaxed from 1 March 2020, relieving the pressure on directors of potential personal liability for trading on whilst insolvent.

It is important to stress that all other safeguards remain live and the directors will still need to demonstrate that they are acting in the best interests of all creditors, should they believe that the Company may be insolvent.

This is only a temporary measure and reading between the lines, it would appear that directors that had been wrongfully trading prior to the COVID19 outbreak would still be open to action.

It was also revealed that new restructuring tools will be added to the insolvency laws including:

  • A moratorium for companies giving them breathing space from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure;
  • Protection of their supplies to enable them to continue trading during the moratorium; and;

A new restructuring plan, binding creditors to that plan
The proposals will include key safeguards for creditors and suppliers to ensure they are paid while a solution is sought.

Further details are yet to be announced but it appears that these measures are in line with the potential changes to the legislation announced in August 2018. How these new business rescue options will work in practice remains to be seen but if used correctly and early enough then they could be a vital tool to support businesses struggling due to COVID19.

Updates to the insolvency laws need to be passed by Parliament before the proposed changes come into force and with the Easter recess coming up, it could be later in April before the new restructuring plan is available. I will provide further information and details as soon they are announced.

In the meantime, if you are experiencing financial difficulties then seek professional advice as early as possible. This will enable you to ensure you meet all your directors’ duties and help you find the most appropriate business rescue tool for your situation.


If you are unsure about what Government support package is available to your business, we are here to help. We have created a simple toolkit that cuts through the noise and makes you aware of exactly what help is available to you. It takes a few minutes to fill out and you can find it on our COVID-19 Information hub

This is very difficult period for all businesses and AAB is here to support and help you through it. For more information on the Government Support Measures please visit our specialist webpage here or contact Duncan Raggett, a member of our dedicated COVID-19 support team who can also be reached at

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