ACCA LW · Chapter 12 · Question 4 of 11
In proceedings for wrongful trading under s214 Insolvency Act 1986, which of the following is a defence available to a director?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) After the director knew or ought to have concluded there was no reasonable prospect of avoiding insolvent liquidation, they took every step to minimise the potential loss to creditors that they ought to have taken
Explanation
Wrongful trading does not require dishonesty, so the absence of intent to defraud is no defence. The only statutory defence is that the director took every step to minimise potential loss to creditors once they knew or ought to have concluded that insolvent liquidation (or administration) could not be avoided. The director is judged against the objective standard of a reasonably diligent person in their position, so a lack of skill is not an excuse (Re Produce Marketing Consortium).
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