Fraudulent Trading

Question 1

Who can bring a claim for fraudulent trading?

Answer 1

Liquidator or Administrator

Question 2

Who can be liable for fraudulent trading?

Answer 2

Any person knowingly party to the carrying on of a business with intent to defraud creditors or for any fraudulent purpose—including directors and third parties such as banks.

Question 3

What must be proven for a fraudulent trading claim to succeed?

Answer 3

Actual dishonesty and intent to defraud or carry out a fraudulent purpose.

Question 4

How is dishonesty assessed in fraudulent trading claims?

Answer 4

Subjectively—based on what the person actually knew or believed, including blind-eye knowledge (deliberately avoiding confirmation of suspicions).

Question 5

What is the test for dishonesty as per Ivey v Genting Casinos

Answer 5

1. Determine the defendant’s actual state of knowledge or belief (subjective),
2. Assess whether their conduct was dishonest by the standards of ordinary decent people (objective).

Question 6

Is it necessary to show that all creditors were defrauded?

Answer 6

No. Fraud against just one creditor is sufficient

Question 7

What remedy can the court order for civil fraudulent trading?

Answer 7

The court can order the person to contribute to the company’s assets such sum as it thinks proper to compensate for the loss caused to creditors.

Question 8

What is the penalty for criminal fraudulent trading

Answer 8

Up to 10 years’ imprisonment on indictment and/or a fine.