ACCA LW · Chapter 12 · Question 3 of 11
A company's director allowed the company to keep trading and taking customer deposits when she knew there was no prospect of supplying the goods, intending to keep the deposits. Which of the following best describes her potential liability?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Fraudulent trading, which is both a criminal offence under the Companies Act 2006 and a basis for civil liability under s213 Insolvency Act 1986 if the company is wound up
Explanation
Fraudulent trading occurs where business is carried on with intent to defraud creditors or for any fraudulent purpose. Under s993 Companies Act 2006 it is a criminal offence whether or not the company is wound up, and under s213 Insolvency Act 1986 the court may, on a liquidator's application, order any person knowingly party to it to contribute to the company's assets. The dishonest intent here goes beyond wrongful trading.
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