Wrongful Trading and Fraudulent Trading
If your company is struggling to pay its debts, as a director you need to take steps to avoid allegations of wrongful trading or fraudulent trading. You are strongly advised to seek advice from expert insolvency solicitors at the earliest opportunity to safeguard your position and ensure you handle this challenging situation correctly.
If you have been accused of wrongful or fraudulent trading, our insolvency and restructuring lawyers can represent you. We have expertise in this complex area of law and have wide experience of helping directors facing allegations of breaching the rules.
We routinely advise businesses during difficult times and if you are a company director, we can provide the advice and guidance you need to navigate insolvency or the period leading up to a potential insolvency.
Our services include:
- Advice and representation for wrongful trading
- Advice and representation for fraudulent trading
- Legal advice for company directors facing insolvency
Where necessary, we work with other experts and existing advisers to provide independent and tailored advice needed to protect your situation as well as that of your business.
If you are a company director facing allegations of wrongdoing, please see our page giving more information on our services for Claims against Company Directors or call to speak to one of our team.
For immediate, expert advice on wrongful trading or fraudulent trading, you can contact your local Isadore Goldman office in London, Norwich or Portsmouth, or email info@isadoregoldman.com.
Why choose Isadore Goldman for help with wrongful trading and fraudulent trading?
High level of independent accreditation
Our services are independently evaluated, and we hold accreditations in the areas of insolvency law and restructuring. This includes rankings from leading legal directories Chambers & Partners and the Legal 500.
Clear, pragmatic legal advice
Our advice to you will be clear and realistic. We will make sure that you have an honest assessment of your situation and what you can expect to achieve. We will answer your questions frankly and ensure that you have a clear understanding of the options available to you.
Bespoke recommendations focused on the right outcome
We will work with you to establish what you want to achieve from the situation you are in. If your business is facing insolvency, we can discuss issues such as restructuring, company voluntary arrangements and administration.
If you are dealing with allegations of wrongful trading or fraudulent trading, we will take steps to establish a robust defence and advise you of the potential way forward, taking into account the outcome you want to achieve.
Outstanding track record
As experts in the field of insolvency, we have an excellent track record of success in steering clients through complex and challenging situations. Our deep understanding of the potential ways of handling business financial problems means that we are able to give directors the advice and representation needed to protect their position.
Wrongful trading advice and representation
Wrongful trading occurs when a director continues to trade after they should have known or concluded that there was no reasonable prospect of the company avoiding insolvent liquidation or administration.
It is sometimes difficult to assess the point at which trading becomes wrongful and directors need to tread very carefully if they suspect their business may be approaching insolvency.
A director who is found liable for wrongful trading could face disqualification from acting as a director for up to 15 years as well as a fine. They can also be held personally liable for losses incurred during the period of wrongful trading.
Director obligations on insolvency
To avoid allegations of wrongful trading, directors need to take great care if there is a risk that their company is insolvent. This is often the point at which professional help should be sought to ensure that any further trading is lawful.
Directors have a duty to ensure that more debt is not taken on at this time and to protect the interests of existing creditors as far as possible. They must treat all creditors as equal and not put any in a more favourable position or choose which debts to pay off.
In some limited circumstances, transactions may be permitted when a company reaches the point of potential insolvency. For example, if a deal is that would put the company in a better position is going through, there may be scope to continue with it. However, it will always be essential to seek advice from an expert insolvency solicitor before doing so.
Defences to wrongful trading
The Insolvency Act 1986 provides a statutory defence to wrongful trading where a company director “… took every step with a view to minimising the potential loss to the company’s creditors as … he ought to have taken.”
To meet this standard, it is crucial to keep detailed and accurate records during any period when a company may be approaching insolvency as well as regularly monitoring the trading position and financial situation, including during formal board meetings.
If assets are sold at this time, they must be sold at full market value and not at an undervalue. Additional debt should not be taken on.
Attempts need to be made to minimise losses and expert advice should be sought so that directors can demonstrate that they took the necessary steps to protect creditors’ interests.
Creditors need to be advised of the situation and negotiations can be entered into where necessary to deal with sums owed and the supply of goods or services.
Directors also need to consider how to handle potential insolvency and what route they intend to take.
Our team can step in to ensure that you meet the necessary standards and that every step is taken to minimise loss, as legally required. We work with businesses in a full range of sectors in managing insolvency and potential insolvency and will give you the advice and guidance you need to safeguard your position and that of your business.
Fraudulent trading advice and representation
Fraudulent trading is regarded seriously by the authorities. It is defined as carrying on the business of a company with the intent to defraud creditors or for any fraudulent purpose. The offence is not limited to company directors and can be committed by anyone who is knowingly a party to the business.
The penalties for fraudulent trading can be substantial, with a maximum prison sentence of ten years and an unlimited fine. The fine can include a punitive element as well as interest and legal costs, so it has the potential to be extensive.
Fraudulent trading is harder to prove than wrongful trading, as an intention to defraud must have existed.
Examples of actions that could constitute fraudulent trading include:
- Obtaining goods on credit, knowing the bill cannot be paid
- Continuing to trade and accepting deposits from customers, knowing there is no means to complete the work
- Not notifying creditors of insolvency and continuing to trade
- Selling company assets at below-market value
Because of the severity of the potential sentence, you should speak to an expert fraudulent trading solicitor immediately if you are advised that you are being investigated by the authorities.
If you ask us to represent you, we will work to establish a robust defence. It may be that you had no intention to defraud and we can look at the details of what has happened to demonstrate this.
Legal advice for company directors facing insolvency
As insolvency specialists, we are one of only a few law firms that have the expertise to provide intensively tailored and detailed advice to directors that aims to both protect their position and safeguard the company’s position as far as possible.
We have a reputation for the deep understanding we have of handling wrongful and fraudulent trading cases. We regularly work with insolvency practitioners and are well respected by other professionals within the insolvency sphere.
When engaged by directors prior to insolvency, we are able to provide advice and representation for potential allegations of wrongful or fraudulent actions, including whether there is any risk of personal liability. If there is, we will provide the guidance necessary to defend your position.
Contact our expert wrongful trading and fraudulent trading solicitors
For clear and pragmatic advice on wrongful trading and fraudulent trading, contact our team today. You can get in touch at one of our offices in London, Norwich or Portsmouth or email info@isadoregoldman.com.