Kittiwake Ltd went into insolvent liquidation. Its directors kept trading for a year after they ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation, increasing the losses to creditors. There is no evidence of dishonesty. Which statement is correct?

Correct answer: B) The court may order the directors to contribute to the company's assets for wrongful trading, unless they show they took every step to minimise potential loss to creditors

Explanation

Wrongful trading under s214 Insolvency Act 1986 is civil liability and needs no dishonesty. It applies where a director knew, or ought to have concluded, that there was no reasonable prospect of avoiding insolvent liquidation or administration. The court judges this against the standard of a reasonably diligent person with the director's general knowledge, skill and experience. The only defence is that the director took every step to minimise potential loss to creditors. Fraudulent trading requires intent to defraud, which is absent here.