ExpertMedium1 markMultiple Choice
ACCA · Question 39 · Corporate and Business Law
Under s.214 of the Insolvency Act 1986, what is the standard used to judge whether a director should have known the company was facing unavoidable insolvent liquidation?
Under s.214 of the Insolvency Act 1986, what is the standard used to judge whether a director should have known the company was facing unavoidable insolvent liquidation?
Answer options:
A.
A purely subjective test.
B.
A purely objective test.
C.
An objective and subjective test.
D.
The test of absolute certainty.
How to approach this question
Identify the dual nature of the test for wrongful trading.
Full Answer
C.An objective and subjective test.✓ Correct
The test for wrongful trading is both objective (what a reasonably diligent person carrying out those functions would know) and subjective (the actual knowledge, skill, and experience of that particular director).
Common mistakes
Thinking the test is only objective.
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