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A director guilty under commencement of insolvent liquidation is sued under Wrongful Trading.So does that mean that he shall also be sued for fraudulent trading under insolvency act?
Does both wrongful and fraudulent act applies when director being sued under Wrongful trading? or mere wrongful trading?
I mean is it implied that a director guilty under Wrongful trading shall also be guilty under fraudulent trading (insolvency act) because of involvement in insolvent liquidation..
Hi Sourav,
No is the short answer. Just because a director is liable for wrongful trading it does not automatically mean that he is guilty of fraudulent trading.
Wrongful trading is a civil liability offence so is technically easier to prove, especially as there is no need to prove that the director acted with intent. However, if you want to prove a director is guilty of fraudulent trading you need to prove that the director had an intent to be dishonest and this needs to be shown beyond reasonable doubt as its a criminal offence.
I hope that clarifies.
Vijay
Sir,
I reckon there are two provisions under Fraudulent trading..First, Of course as you mentioned dishonest intent i.e the business was primarily set-up or continued to perpetuate with an intention to defraud creditors..This is criminal offence under company’s act.
But, I am talking about the 2nd provision which comes under INSOLVENCY ACT i.e being involved in insolvent liquidation..
Hi Sourav,
Even if you are referring to s.213 Insolvency Act, rather than Companies Act, there is still a requirement to prove “intent” even though there is only civil liability. So to answer your question it is not implied that a director liable under s.214 wrongful trading will also be liable for s.213 Fraudulent trading as they are 2 separate offences requiring different elements to be proven.
I hope this clarifies.
Vijay
Hi Sourav,
Even if you are referring to s.213 Insolvency Act, rather than Companies Act, there is still a requirement to prove “intent” even though there is only civil liability. So to answer your question it is not implied that a director liable under s.214 wrongful trading will also be liable for s.213 Fraudulent trading as they are 2 separate offences requiring different elements to be proven.
I hope this clarifies.
Vijay
Hi Sourav,
Even if you are referring to s.213 Insolvency Act, rather than Companies Act, there is still a requirement to prove “intent” even though there is only civil liability. So to answer your question it is not implied that a director liable under s.214 wrongful trading will also be liable for s.213 Fraudulent trading as they are 2 separate offences requiring different elements to be proven.
I hope this clarifies.
Vijay
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