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What is "Wrongful" or "Fraudulent" trading?

 

Both these matters are dealt with in the Insolvency Act 1986 and can have serious consequences. So, should any business you are involved in be experiencing financial difficulties getting prompt advice from an insolvency professional is very important.

 

Wrongful Trading (s214)

 

This is where a director has allowed a company to continue trading in circumstances where they knew, or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation.

 

The directors involved may be made personally liable to make a contribution to the company’s assets, unless the Court is satisfied that they took every step with a view to minimising the potential loss to the company's creditors as they ought to have. One factor that is often given particular weight by the courts in coming to their decision is whether relevant professional advice was sought and followed.

 

Fraudulent Trading (s213)

 

This where a company has been allowed to carry on business with intent to defraud creditors (of the company or any other person), or for any fraudulent purpose.

 

It is a criminal offence and those involved can be made personally liable for the company’s liabilities.

 

If you are at all concerned, then take advice...

 

For impartial, in-depth, one-to-one advice
contact us on 0161 438 8555 or

by email to info@jldllp.co.uk

 




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