UK Accounting Glossary
Wrongful trading is a type of civil wrong found in UK insolvency law, under Section 214 Insolvency Act 1986.
Wrongful trading is when a company trades during a period is which it has no reasonable prospect of avoiding insolvent liquidation.
The liquidator of a company may petition the courts for an order instructing a director of a company that has gone into insolvent liquidation to make a contribution to the company’s assets. A court may order any contribution to be made that it considers proper if it is reasonable to assume that the company director knew, or ought to have known, of the company’s situation.
In regards to wrongful trading, no intention to defraud needs to be shown. A director would be judged liable if a reasonably diligent person undertaking the same function in the company would have realised the situation.
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This glossary post was last updated: 29th January 2019.