Fraudulent Trading as a Crime; Some Recent Developments
| Author | D. W. Fox |
| Published date | 01 November 1984 |
| Date | 01 November 1984 |
| DOI | http://doi.org/10.1177/002201838404800407 |
| Subject Matter | Article |
FRAUDULENT
TRADING
AS
A
CRIME;
SOME
RECENT
DEVELOPMENTS
D. W. Fox*
Fraudulent trading was introduced as a feature of company law by
the Companies Act 1929.1The principal statutory provision on this
topic is now contained in section 332 of the Companies Act 1948. 2
Thus section 332(1) provides, inter alia:
"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 court, on the application of the official receiver, or the
liquidator or any creditor or contributory of the company, may, if it
thinks
proper
so to do, declare that any persons who were
knowingly parties to the carrying on of the business in manner
aforesaid shall be personally responsible, without any limitation of
liability, for allor any of the debts
or
other
liabilities of the company
as the court may direct.?"
Thus section 332, even in its civil law aspect, is essentially
punitive in character." But the civil law aspect of fraudulent trading
isonly one side of the coin; on the
other
side, arising out of exactly
•LL.B., M.B.I.M., A.C.I.S., Solicitor, Teesside Polytechnic.
I. See
CA.
1929. s.275. This provision only covered fraudulent trading by
directors.
2. But for important developments on this topic contained in the CompaniesActs
1980 and 1981 see infra.
3. When a company is duly registered under the prevailing companies lcgisla-
tion-currently
the Companies Acts 1948 to
1981-it
becomes acorpora/ion, i.e, a
person, albeit an artificial person, quite distinct from its shareholders and directors,
so that its liabilities are its own
and
not the responsibility of its shareholders or
directors; see. e.g. Salomon v. Salomon &Co. Lui. 118971
A.C
22. Legislation and
case law do, however, provide
that
in certain circumstances the protection thus
given by incorporation can be set aside to expose to the full rigour of civil liability
individuals concerned with the operation of companies. Section 332 of the
CA.
1948
is one of the most important provisions empowering the courts to "lift the veil" of
incorporation.
4. See, e.g. observations of Maugham J. in Re Wm. C. Leitch Bros. Lid. infra.
398
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