In its simplest form, Fraudulent Trading is where a company carries on a business with the intention of defrauding creditors, or for any fraudulent purpose, and this applies whether the company is trading, has ceased trading or is in the process of being wound up. Every person who is knowingly a party to the carrying on of the business in that manner commits an offence.
Non-corporate traders are also can also be subject to proceedings under the Fraud Act. This include’s sole traders, partnerships, trusts and companies registered overseas. The Fraud Act offence is committed when a person:-
Fraudulent trading cases cover a wide ambit of criminal culpability. At one extreme there may be calculated and reckless trading on a large scale, with no genuine intention to discharge the company’s debts but simply to line the directors’ pockets. At the other end of the scale there may be a properly funded business which runs into financial problems, where the directors attempt to trade in order to save their employees’ jobs, but come to a point where they should have faced up to reality and ceased to trade, but didn’t.
Fraudulent Trading may impact on liability for corporate insolvency. A limited liability company has a separate legal identity from its directors and managers and so they are not normally liable personally for the debts of the company. The Insolvency Act however provides that knowingly parties to such conduct may be required to contribute to the assets of the company concerned in the course of its winding-up.
A finding of Fraudulent Trading at criminal law may also lead to a confiscation order being made against the perpetrators of the illegality, and require payment of any benefit gained as a consequence of the misconduct.
Saunders Solicitors has considerable experience of dealing with such cases, and will defend its client’s interests with expertise, energy and commitment.