Wrongful trading arises where a company continues to trade at a point when its directors knew, or ought to have known, that there was no reasonable prospect of avoiding insolvent liquidation. Governed by section 214 of the Insolvency Act 1986, wrongful trading can expose directors to personal financial liability for losses caused to creditors. This article explains when trading becomes wrongful, who may bring a claim, and the consequences for directors facing insolvency proceedings.

Directors today operate under unprecedented scrutiny — from stricter Companies Act duties to evolving compliance demands and rapidly shifting commercial risks. Even experienced leaders can fall into avoidable mistakes that expose both the company and the board personally. This article explores the most common errors directors make, the real consequences they carry, and the practical steps every board should take to avoid them.