The Insolvent Trading Safe Harbour - Uncertainty Prevails

In May 2020, Parliament passed legislation which creates a temporary safe harbour for directors from liability under the insolvent trading provisions of the Companies Act 1993, namely ss 135 and 136. The safe harbour applies to those companies that are suffering from liquidity issues caused by COVID‑19. The safe harbour is uncertain in many respects, which will likely undermine its purpose. The issues include the focus on liquidity over balance sheet considerations, the interaction between the safe harbour and the duty of good faith and the duty of care, the subjective nature of the criteria and uncertainty over the burden of proof.