IVA Glossary
W
Wrongful Trading
Wrongful trading refers to such cases when companies face liquidation problems. Nevertheless, wrongful trading also implies that the director of the company in question let the firm continue its operations although he or she could have foresee that there was no real chance that the company would financially survive. So if the director of a company should have concluded that the company were to go into bankruptcy, but he or she did not do anything, this act involves a wrongful trading.
If a company is wound-up, the director in question can be said to be personally liable for the company's situation, and can be asked by the Court to contribute to the company's assets in case he or she is found legally guilty. So directors are generally guilty of wrongful trading if their companies go into insolvent liquidation and it can be proved that they could have foreseen these negative consequences. So if the director could have reasonably prospect the company's insolvent liquidation, but he or she chose instead to continue the operations, this represents a wrongful trading.
In order to defend him- or herself, a director can prove that he/she has taken every step in order to minimise the total losses of the company's creditors.
If a company is wound-up, the director in question can be said to be personally liable for the company's situation, and can be asked by the Court to contribute to the company's assets in case he or she is found legally guilty. So directors are generally guilty of wrongful trading if their companies go into insolvent liquidation and it can be proved that they could have foreseen these negative consequences. So if the director could have reasonably prospect the company's insolvent liquidation, but he or she chose instead to continue the operations, this represents a wrongful trading.
In order to defend him- or herself, a director can prove that he/she has taken every step in order to minimise the total losses of the company's creditors.
