LWF4 Eng
Syllabus H. Corporate Fraudulent and Criminal Behaviour H1. Fraudulent and Criminal Behaviour

H1f. Fraudulent and Wrongful trading

Syllabus H1f)

Recognise the nature and legal control over fraudulent and wrongful trading.

Fraudulent trading

Directors continue business, defrauding creditors

  1. The directors must have acted dishonestly

  2. The directors must have intended to make a gain for themselves

Remedies

  1. If Criminal prosecution Max 10 years in prison and/or a fine

  2. If Civil action (insolvent liquidation) 'make such contribution to the company's assets as the court thinks proper'

Wrongful Trading

When can't prove fraudulent trading

Directors continue business - knowing (or should have) no reasonable prospect of avoiding insolvent liquidation

Not taking reasonable steps to avoid losses for creditors

Remedy is civil - 'make such contribution to the company's assets as the court thinks proper'