DIRECTOR'S DUTIES

WRONGFUL TRADING & FINANCIAL DIFFICULTIES



Whilst wrongful trading may seem easy to define, the reality is often very different. There are many reasons why a company may find themselves facing charges of wrongful trading.

Wrongful trading and fraudulent trading are often confused, but there is a key difference and this is the presence of dishonesty.

Fraudulent trading is far more difficult to prove, as the prosecution will be required to reflect dishonesty, meaning it is potentially easier to explore wrongful trading instead.

It can be difficult for Directors of companies to face up to financial struggles, in some cases they may not be fully aware of their company position.

The recession saw a great many allegations of wrongful trading, brought about not through incompetence or deliberate risk taking, but a lack of awareness and naivety.

Courts will usually look at a great many factors when presented with a case of wrongful trading, including the various circumstances that led to the financial difficulties, which is why there is no ‘set’ way to deal with wrongful trading, each case is different.

Directors also need to consider that if they are part of a Limited company their personal assets can become at risk and be used as a stop gap to fund any shortfall to pay creditors.


If you are facing charges of wrongful trading your best first option is to take legal advice, but there are also preventatives which should assist in avoiding future allegations.

Please note that this is just a basic guide, for more information on wrongful trading please contact a team of our team on 01733 333333.





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