Wrongful Trading and Directors’ Personal Liability

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.