Wrongful trading Section 12: Suspension of liability for wrongful trading – Great Britain
The measure to temporarily suspend liability under wrongful trading provisions in the Insolvency Act 1986 is in section 12 of this Act. The provision does not formally amend the Insolvency Act 1986, but instead alters how the relevant sections of that Act will be applied in relation to a company’s financial position during the relevant period.
	Subsection (1) sets out that the court will not hold a director responsible for any worsening of the financial position of the company or its creditors during the relevant period, which is defined later. There is no requirement to show that the company’s worsening financial position was due to the COVID-19 pandemic.
	Subsections (3), (4), (5) and (6) set out that subsection (1) does not apply if at any time during the relevant period the company is excluded from being eligible by virtue of its inclusion within specified paragraphs of Schedule ZA1 to the Insolvency Act 1986 (insurance companies, banks, electronic money institutions, investment banks and firms, payment institutions etc.) or if a company has permission to carry on a regulated activity under Part 4A of the Financial Services and Markets Act 2000 and is not required to refrain from holding money for clients.
	Subsection (2) defines the relevant period as beginning on 1 March 2020 and ending on 30 September 2020.
	Subsection (7) confirms that the provisions must be treated as if they are contained in Part 4 of the Insolvency Act 1986 (for liquidation) or Part 6 of that Act (for administration). This means that the suspension will apply wherever wrongful trading provisions are applied by the Insolvency Act 1986 or other legislation, for example, in the case of limited liability partnerships.
	Subsection (8) sets out that this provision does not have effect in relation to building societies, certain friendly societies or in relation to registered societies that are credit unions or carry out regulated activity in relation to contracts of insurance.