Wrongful trading provisions to be temporarily suspended for UK companies

10 Apr 2020 Denise Copeland    Last updated: 2 Jul 2020

Charitable companies and their trading subsidiaries will be relieved to hear that the government is planning to temporarily suspend wrongful trading provisions retrospectively from 1 March 2020 until 30 June. 

The government’s intervention to protect companies hit by COVID-19,  means that companies are being given breathing space that could help them avoid insolvency and the threat of personal liability from wrongful trading.  

Under Insolvency legislation, directors may be personally liable from wrongful trading if the company has gone into insolvent liquidation and they carried on business after they knew, or ought to have known, that the company was heading for insolvency.

For more information on the Corporate Insolvency and Governance Act 2020, see the following briefing from Bates Wells solicitors

Staying solvent

In the current climate many charities are facing financial troubles which means that the Trustees may have to make some difficult decisions. For example, organisations with limited reserves may find it difficult to remain solvent. 

Thankfully emergency funding streams have been made available for charities which should help but this may not save every charity.  Charity Trustees and Directors of not-for-profits need to put plans and safeguards in place to keep their organisations afloat or regretfully they may have to plan for winding them up. 

The following guidance from Bates Wells solicitors on Charity Governance and solvency is a guide for trustees concerned about solvency which includes an important plan of action in managing the current financial crisis.

Charity Governance and solvency, a coronavirus guide

Charities and insolvency

Other relevant guidance

Winding up and dissolving an organisation

Guidance for charities experiencing financial difficulties 




denise.copeland@nicva.org's picture
by Denise Copeland

Governance and Charity Advice Manager

[email protected]

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