Fradulent Trading Flashcards
(14 cards)
What is fraudulent trading?
Continuing to trade with intent to defraud creditors when a company is insolvent or near insolvency
Who does fraudulent trading apply to?
Any person (not just directors) who knowingly participates in fraudulent business conduct
When is fraudulent trading most commonly raised?
1) Liquidation
2) Administration
Who can be liable?
Any person
When could a bank be liable for fraudulent trading?
If its employee knowingly assists a company in incurring debts, it can’t pay
What is the mental element of fraudulent trading?
Actual dishonesty must be proved
What type of test is the mental element for fraudulent trading?
Subjective test (what they actually knew or believed)
What is blind-eye knowledge in fraudulent trading?
Wilful ignorance counts at dishonest
What is the objective test in mental element of fraudulent trading?
Would an ordinary decent person view the conduct as dishonest?
What is civil remedy for fraudulent trading?
Court can order contribution to company’s assets to compensate creditors
What is the amount based on for remedy for fraudulent trading?
On the actual loss
What happens to money recovered through fraudulent trading?
Held on trust for all unsecured creditors, not just the defrauded creditor
What is the criminal penalty for fraudulent trading?
Up to 10 years’ imprisonment and unlimited fine
What happens to a director found guilty of fraudulent trading?
Likely to issue a disqualification order for between 2 and 15 years
