ICAEW BL · Chapter 11 · Question 5 of 10
Which statement about fraudulent trading under the Insolvency Act 1986 and the Companies Act 2006 is correct?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) It requires proof that the business was carried on with intent to defraud creditors or for any fraudulent purpose, and it can give rise to both civil and criminal liability
Explanation
Fraudulent trading requires that the business was carried on with intent to defraud creditors or for any fraudulent purpose, which means real dishonesty. In a winding up or administration, any person knowingly party to it can be ordered to contribute (s213 and s246ZA Insolvency Act 1986). It is also a criminal offence under s993 Companies Act 2006, which applies whether or not the company is being wound up. Liability is not limited to directors.
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