Wrongful Trading in UK Law

Leading Cases
  • Phillip Roberts (as Liquidator of Onslow Ditchling Ltd) v Peter Frohlich and Another
    • Chancery Division
    • 18 Febrero 2011

    In my judgment each ought to have concluded at or about 1 September 2004 (certainly by ( say) 14 September 2004) that there was no realistic prospect of avoiding an insolvent liquidation.

  • Housemaker Services Ltd and Another v Huw Cole and Another
    • Chancery Division
    • 26 Abril 2017

    Moreover, it is not an unusual thing, let alone wrong, that a director who is a shareholder of a company and who funds the company's claim will ultimately benefit from it if it is successful. It is simply a consequence of the policies adopted by our company law, allowing businessmen to take some risks in seeking profit without incurring unlimited liability.

    This might be, for example, that the claim is not made in good faith, or for the benefit of the company, or it might be that the claim has been improperly conducted by the director. So, for example, in both Gardiner v FX Music Ltd and Deutsche Bank v Sebastian Holdings Inc, a director of the unsuccessful corporate party was ordered to pay the costs to the successful party. But in each case the director had given false evidence and fabricated documents.

  • Ward v Aitken and Others ; Re Oasis Merchandising Services Ltd
    • Court of Appeal (Civil Division)
    • 09 Octubre 1996

    Considerations such as these lead us to consider whether a distinction should not be drawn between assets which are the property of the company at the time of the commencement of the liquidation (and the property representing the same), including rights of action which arose and might have been pursued by the company itself prior to the liquidation, and assets which only arise after the liquidation of the company and are recoverable only by the liquidator pursuant to statutory powers conferred on him.

    We respectfully agree, supporting as it does the distinction which we would draw between the property of the company at the commencement of the litigation (and property representing the same) and property which is subsequently acquired by the liquidator through the exercise of rights conferred on him alone by statute and which is to be held on the statutory trust for distribution by the liquidator.

  • Re Sevenoaks Stationers (Retail) Ltd
    • Court of Appeal (Civil Division)
    • 31 Julio 1990

    Mr. Cruddas made a deliberate decision to pay only those creditors who pressed for payment. The obvious result was that the two companies traded, when in fact insolvent and known to be in difficulties at the expense of those creditors who, like the Crown, happened not to be pressing for payment. Such conduct on the part of a director can well, in my judgment, be relied on as a ground for saying that he is unfit to be concerned in the management of a company.

  • Stone and Rolls Ltd ((in Liquidation)) v Moore Stephens (A Firm)
    • House of Lords
    • 30 Julio 2009

    The company is not fixed with its directors' fraudulent intentions because that would be unjust to its innocent participators (honest directors who were deceived, and shareholders who were cheated); the guilty are presumed not to pass on their guilty knowledge to the innocent.

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Legislation
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Books & Journal Articles
  • Wrongful Trading: An Impotent Remedy?
    • Nbr. 4-1, March 1996
    • Journal of Financial Crime
    • 38-46
    Improved creditor and community protection seemed attainable goals when Professor Daniel Prentice described s. 214 of the Insolvency Act (‘s. 214’) as ‘one of the most important developments in com...
  • What Can We Expect to Gain from Reforming the Insolvent Trading Remedy?
    • Nbr. 78-1, January 2015
    • The Modern Law Review
    This paper argues that reform of the wrongful trading remedy in section 214 of the Insolvency Act 1986 is unlikely to yield significant increases in civil recovery for creditors of insolvent compan...
    ...... What Can We Expect to Gain from Reforming the Insolvent Trading Remedy? Richard Williams * This paper argues that reform of the wrongful trading remedy in section 214 of the Insolvency Act 1986 is unlikely to yield significant increases in civil recovery for creditors of insolvent ......
  • Mangled metaphors.
    • Nbr. 2008, April 2008
    • Financial Management (UK)
    • ... last out
    ...... in order to meet added-value milestones may become vulnerable to 'wrongful trading'.. However, an integrated approach to financial management could ......
  • Asset Location in Corporate Insolvency
    • Nbr. 1-1, January 1993
    • Journal of Financial Crime
    • 20-30
    This paper considers the methods open to a liquidator to discover and recover assets. In particular, it focuses on the powers conferred on the liquidator in the 1986 insolvency legislation and thei...
    ...... to the liqui-dator by the development of the concept of wrongful trading.40 The description of wrongful trading given below will show that ......
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Law Firm Commentaries
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Forms
  • Chapter CFM33193
    • HMRC Guidance manuals
    • Formularios de Derecho Civil, Mercantil y Registral
    ...... imply that the directors would be vulnerable to accusations of wrongful trading. Reasonable to assume. The evidence for such a ‘reasonable ......
  • Apply to become someone's deputy (make a declaration)
    • Court and tribunal forms
    Court of Protection forms including the COP1 application to make decisions on someone's behalf.
    ...... been the subject of a declaration under section 213 (fraudulent trading). or section 214 (wrongful trading) of the Insolvency Act 1986?. If Yes, ......
  • Chapter EIM02100
    • HMRC Guidance manuals
    • Formularios de Derecho Civil, Mercantil y Registral
    ......The former could be:. a sum awarded as damages by a court for wrongful repudiation of a contract, or a settlement of agreed damages without court ... an office or employment the earnings of which have been treated as trading income , see BIM40135 to BIM40140. ......
  • Chapter CH282220
    • HMRC Guidance manuals
    • Formularios de Derecho Civil, Mercantil y Registral
    ......The company entered into trading arrangements which were “too good to be true”. Mr X caused the company ...The VAT fraud, including wrongful VAT reclaims against HMRC, resulted in tax losses of over £7.1 million. ......
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