Wrongful Trading

This occurs where the directors of a company have failed to take every step to minimise losses to creditors when they knew or ought to have known that there was no reasonable prospect of the company avoiding Insolvent Liquidation. When wrongful trading has occurred a Liquidator has a right to sue the directors for a contribution towards the loss suffered by the creditors. The right to sue is only available to a Liquidator in an Insolvent Liquidation, it is not available in Administration. Wrongful Trading is covered under Section 214 of the Insolvency Act 1986.