Relaxation of wrongful trading rules

Directors face personal liability for ‘wrongful trading’ when they ought to know there is no reasonable prospect of avoiding insolvency and they fail to take every step to minimise the loss to the company’s creditors. How much they could be liable for is usually calculated by how much more of a shortfall the company’s creditors as a whole suffer based on the period after the directors should have put the company into an insolvency process (the point of no return when insolvency became inevitable is referred to as the ‘trigger date’).  

Unlike some jurisdictions with more draconian rules, directors of UK companies are not obliged to enter an insolvency process within a fixed period. Instead we have a nuanced approach, which allows directors to conclude whether it will be in the best interests of creditors to keep the business trading under their control until a better outcome can be achieved compared with starting an insolvency process.