BL - Corp. Insolve & Dir - fraud

Question 1

What are the implications for the directors if a company becomes insolvent?

Answer 1

They may be personally liable to compensate the company and its creditors if found guilty of:

• Fraudulent trading 👺
• Wrongful trading 😳

Question 2

Who can a claim of Fraudulent trading be brought against?

👺

Answer 2

• any person
• who is knowingly party to the carrying on of any business of the company
• with intent to defraud creditors or for any fraudulent purpose

Question 3

Is the dishonest criteria objective or subjective?

Answer 3

Subjective - what the particular person knew or believed. 🤔

Knowledge includes blind-eye knowledge - (suspicion of the relevant facts with a decision to avoid confirming that they did exist).

Question 4

What are the remedies for Fraudulent Trading?

Answer 4

• A person can be ordered to make such contribution to the company’s assets as the court thinks proper. 💰
  
  • Not punitive - contribution should only reflect the loss caused to the creditors.
  • Any sums recovered are held on trust for the unsecured creditors generally and not for the defrauded creditor.
• Where the person is also a director, the court is likely also to make a disqualification order. ❌🎩
• Criminal sanctions can be imposed by the court. 👮

The penalties are
- imprisonment (of up to 10 years on indictment) and/or
- fines.

Question 5

Who can bring a claim of Fraudulent trading?

Answer 5

A Liquidator or Administrator 💦

Question 6

Do all the creditors need to have been defrauded for a claim of Fraudulent trading be brought?

Answer 6

No