Under section 213 of the Insolvency Act 1986 (fraudulent trading), who can be held liable to make a contribution to the company's assets?

Answer options:

Only the formally appointed directors of the company.

Any person who was knowingly a party to the carrying on of the business with intent to defraud creditors.

Only the shareholders of the company.

The company's auditors.

How to approach this question

Distinguish between the scope of liability for fraudulent trading versus wrongful trading.

Full Answer

B.Any person who was knowingly a party to the carrying on of the business with intent to defraud creditors.✓ Correct

Unlike wrongful trading (s.214), which only applies to directors and shadow directors, fraudulent trading (s.213) can apply to 'any person' who knowingly participated in carrying on the business with intent to defraud creditors. This could include employees, advisors, or third parties.

Common mistakes

Assuming fraudulent trading only applies to directors, confusing it with wrongful trading.

Question 22 All questions Question 24

Practice the full ACCA LW — Corporate and Business Law Practice Exam 3

60 questions · hints · full answers · grading

More questions from this exam

Q01In the English legal system, which of the following accurately describes the difference between t...Easy Q02Which of the following courts is bound by the decisions of the Court of Appeal (Civil Division)?Medium Q03When interpreting statutes, which rule allows a judge to consider the original common law defect ...Medium Q04A tech startup, CloudNova, advertises a new cloud storage package on its website for £10 per year...Medium Q05In contract law, past consideration is generally not valid. However, there are exceptions. Which ...Hard

View all 60 questions →