By Andrew Hack, Solicitor, and Stephen Mullette, Principal, of Matthews Folbigg Lawyers, in our Insolvency, Restructuring and Debt Recovery Group.
During the COVID-19 outbreak, insolvent trading laws have been relaxed. But this does not mean there is no risk to directors. In reality the breathing space has simply been extended to allow directors to work out a solution. In our previous blog in this series, we discussed the obligations on directors when their companies are or might become insolvent. This blog explores what directors should do about it.
Company directors who fear that a company is or may become insolvent and who might not be protected by the amendments should give consideration to appointing a voluntary administrator (“VA”). Appointing a VA puts in place a moratorium on enforcement action by creditors while the VA investigates the affairs of the company and reports to creditors, including even certain enforcement action by lenders and landlords. Further, director exposure to liability for insolvent trading ceases from that day forward, while the possibility of the company continuing to exist is kept alive.