Wrongful & Fradulent Trading

Question 1

Define Fraudulent Trading

Answer 1

Company carries on a business with INTENTION DEFRAUDING creditors

Including- D continue to trade whilst insolvent
Entering into debts they know company won’t be able to repay

Criminal act under companies act 06

Question 2

Define Wrongful trading

Answer 2

D of company have continued to trade when they knew/ ought to have concluded
There was no REASONABLE prospect of avoiding INSOLVENT LIQUIDATION

Wrongful trading = civil offence

Question 3

What needs to be proven for wrongful trading?

- fraudulent trading?

Answer 3

Wrongful trading - needs to be proven “ON THE BALANCE OF PROBABILITIES’ ie It is more likely than not
That D are guilty of wrongful trading
…..
FRADULENT TRADING needs to be proven BEYOND REASONABLE DOUBT ie it is almost certain that the D’s are guilty of fraudulent trading

Question 4

Penalties for wrongful and fraudulent trading?

Answer 4

For both:
Between 2 & 15 YRS- disqualified as D

Made PERSONALLY LIABLE for company debts
For Fradulent

Above plus
10YRS- imprisoned