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Wrongful trading claims under sections 214 and 246ZB of the Insolvency Act 1986
Published by a LexisNexis Restructuring & Insolvency expert
Practice notesWrongful trading claims under sections 214 and 246ZB of the Insolvency Act 1986
Published by a LexisNexis Restructuring & Insolvency expert
Practice notes
What is Wrongful trading?
A wrongful trading claim applies to a person if:
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the company has gone into insolvent Liquidation or insolvent Administration
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at some time before the commencement of the company's liquidation or administration, that person knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation or administration (sometimes known as the 'Insolvency point')
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that person was a director of the company at that time
Despite section 214 of the Insolvency Act 1986 (IA 1986) (liquidation) and IA 1986, s 246ZB (administration) both being entitled 'wrongful trading' there is no requirement to show that the company actually traded. In the circumstances, activities short of trading may be the subject of an action, such as selling assets with a view to winding up the company or failing to collect debts owed. Moreover, despite sometimes being referred to as ‘trading while insolvent’, there may be situations where it is advisable for the company to
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Jurisdiction(s):
United Kingdom
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Key definition:
Wrongful trading definition
What does Wrongful trading mean?
The failure by a director of a company, at some time prior to the commencement of such company's winding up, to take every step to minimise the potential loss to the company's creditors once such director knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation.
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