What Is Wrongful Trading? Where You Should Have Done Something Sooner
If a company becomes insolvent and goes into liquidation, directors may be deemed personally liable for ‘wrongful trading’.
This happens if it can be shown that, at some time before winding up proceedings began, the directors knew (or should have known) that there was no reasonable prospect of the company avoiding insolvent liquidation.
In these circumstances a court can order the directors to make a contribution to the company’s assets.
The only defence to wrongful trading is if you can show that you took every action possible to minimise the potential loss to the company’s creditors. This makes it essential that as a director, you have properly documented all the steps when your company faces the threat of insolvency.
Top Tip: It is critical that you should seek advice at the earliest opportunity when you have concerns about the solvency of the company and making sure that you have properly documented all the steps when your company faces the threat of insolvency.
At Altion Law we can help by advising you from the outset on best practice of properly documenting paperwork and compliance procedures. We can provide clear, jargon-free explanations of directors and officers liabilities and compliance procedures and review all your existing procedures and processes to avoid future problems.
Our team can assist you if you have concerns about liability as a director that may impact your business or future business opportunities. If you would like to have a confidential discussion with a member of our team, please complete our Contact Us Form, and we will call you back at a time that is suitable for you or you can contact us directly on 01908 414990.
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