Wrongful trading

Once a director of a company knows (or ought to know) that there is no reasonable prospect that the company will avoid going into liquidation, the director is under a duty to minimise the potential loss to the company’s creditors. A director breaches that duty and wrongfully trades if, for example, he continues to trade and puts creditors in a worse position as a result of that trading.

The liquidator of a company can apply to Court for an Order that the director personally reimburses the company in full or in part for the losses suffered by the company as a result of the wrongful trading.

There is no requirement that the director acted fraudulently or dishonestly.

We can advise you and you co-directors on your responsibilities if you are or may be approaching this point.