Who can bring a fraudulent trading claim?

Cases for fraudulent and wrongful trading can now also be assigned to third parties. Unsecured creditors, either individually or as a group, are able to make claims against directors, where previously, only office holders could bring these types of case, and only in their own name.

What is wrongful trading in insolvency?

According to the Insolvency Act 1986, wrongful trading refers to companies that continued to carry on their daily business trading insolvent, that is, unable to pay their debts as they fall due. It is usually a case of hoping that things will improve even though they continue to spiral downward.

What is the difference between wrongful trading and fraudulent trading?

What is the difference between wrongful trading and fraudulent trading? The main difference between these two types of trading offence is that wrongful trading is a civil offence while fraudulent trading is a criminal offence.

How do you prove wrongful trading?

There are three elements that you need to prove as a liquidator or administrator for a wrongful trading claim:

1. A tipping point.
2. Lack of skill or knowledge from a director.
3. Financial loss.

What did the Insolvency Act 1986 reenact?

By virtue of s. 213, the Insolvency Act 1986 reenacted the “fraudulent trading” provision from the companies law in the law of insolvency and in s. 214 introduced new “wrongful trading” provisions to the law of insolvency.

What does fraudulent trading mean in insolvency law?

213 Fraudulent trading. (1) If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect.

Why was the wrongful trading Act of 1986 created?

Failure to understand or act on these concepts can have severe consequences for your business, your reputation and even your personal life. The Insolvency Act of 1986 introduced wrongful trading to build on the notion of fraudulent trading.

Is it an offence to trade a company while insolvent?

In the UK, and contrary to many misconceptions, it is not an offence to trade a company while it is insolvent. Indeed, in some situations, if the directors genuinely believe that the position will be turned around and the position of creditors will improve, it is the correct thing to do.