Week 13 - Avoid? Creditors Best Interest

Question 1

How do directors avoid being accused of wrongful or fraudulent trading?

Answer 1

Directors must always act in the creditor’s best interest

Question 2

What does this result in?

Answer 2

This even means prioritising creditor payments over personal and bank guarantees

Question 3

Wrongful trading can only apply in…

Answer 3

Terminal insolvency

Question 4

Wrongful trading that can only apply in terminal insolvency will only begin after…

Answer 4

Formal insolvency proceedings, such as liquidation or administration

Question 5

To help, what should directors do?

Answer 5

Directors should keep records of all actions as well as of board and shareholder meetings

Question 6

What is terminal insolvency and when is it brought in?

Answer 6

No hope the business can be saved and it’s only brought in by the administrator at the end