The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Act 2024 (the Act) was signed into law on 9 May 2024 but has not yet been commenced. The Act makes certain amendments to the existing collective redundancy regime in insolvency situations and amends the Companies Act 2014 (the Companies Act) to improve the dissemination of information to employees as creditors in a corporate insolvency situation. Further detail on these aspects of the Act is available here.
In addition to the changes outlined above, the Act amends the provisions in the Companies Act concerning reckless trading. Pursuant to section 610 of the Companies Act, the court has the power to declare that a company officer be made personally responsible, without limitation, for the debts/other liabilities of a company that is being wound up, or to which an examiner has been appointed, where the officer was “knowingly a party to the carrying on of any business of the company in a reckless manner”. The Act will amend this provision to delete the reference to “knowingly” thereby changing the test from a subjective to an objective one.
The Act makes further amendments to section 610 including to change the grounds upon which a court can relieve an officer, either wholly or in part, from personal liability for reckless trading. Currently, under section 610(8) of the Companies Act, the court can grant this relief where the officer acted “honestly and responsibly”. The Act will amend this provision such that the court will examine whether the officer took, from the “relevant time” (being the time from which he/she knew or ought to have known that his/her actions or those of the company would be likely to cause loss to the creditors of the company), “such steps as were reasonability practicable with a view to minimising such loss as he or she ought to have taken”.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.
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