What is wrongful trading? Elliot Green explains all – and questions whether the Government’s decision to suspend the wrongful trading rules last year was a wise one.
Wrongful trading is trading whilst insolvent without having reasonable prospect of avoiding insolvent liquidation. However, a Director is not necessarily liable for such loss caused if he or she took every step to minimise the loss.
Two things need to happen therefore for a Director to be liable to creditors upon a company going into insolvent liquidation in such circumstances: there needs to be a loss to creditors after the date at which the wrongful trading commenced; and the loss suffered by creditors was not minimised.
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