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SCENARIO: Titanium Structures plc is a construction firm. In January, the directors realized the company was hopelessly insolvent due to a supply chain crisis and could not avoid liquidation. However, hoping for a 'miracle contract', they continued trading, ordering £500,000 of steel on credit in February. They had no intention of defrauding the supplier, they were just overly optimistic. In March, the company collapsed into insolvent liquidation.
Based on the directors' actions, which provision of the Insolvency Act 1986 are they most likely to have breached?
ACCA · Question 59 · Corporate and Business Law
SCENARIO: Titanium Structures plc is a construction firm. In January, the directors realized the company was hopelessly insolvent due to a supply chain crisis and could not avoid liquidation. However, hoping for a 'miracle contract', they continued trading, ordering £500,000 of steel on credit in February. They had no intention of defrauding the supplier, they were just overly optimistic. In March, the company collapsed into insolvent liquidation.
If the court finds the directors liable for wrongful trading, what is the likely consequence for them?
SCENARIO: Titanium Structures plc is a construction firm. In January, the directors realized the company was hopelessly insolvent due to a supply chain crisis and could not avoid liquidation. However, hoping for a 'miracle contract', they continued trading, ordering £500,000 of steel on credit in February. They had no intention of defrauding the supplier, they were just overly optimistic. In March, the company collapsed into insolvent liquidation.
If the court finds the directors liable for wrongful trading, what is the likely consequence for them?
Answer options:
They will be sentenced to up to 10 years in prison.
They may be ordered to make a personal contribution to the company's assets.
They will be automatically disqualified from acting as directors for life.
They must personally pay the specific steel supplier the £500,000.
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