ExpertEasy1 markMultiple Choice
ACCA · Question 42 · Syllabus H: Corporate fraudulent and criminal behaviour
Under section 214 of the Insolvency Act 1986 (wrongful trading), who can be ordered by the court to make a contribution to the company's assets?
Under section 214 of the Insolvency Act 1986 (wrongful trading), who can be ordered by the court to make a contribution to the company's assets?
Answer options:
A.
Any employee of the company.
B.
Only persons who were directors (or shadow directors) at the time the company went into insolvent liquidation.
C.
The company's shareholders.
D.
Any creditor who received a preference.
How to approach this question
Identify the specific class of persons liable for wrongful trading.
Full Answer
B.Only persons who were directors (or shadow directors) at the time the company went into insolvent liquidation.✓ Correct
Wrongful trading applies when a company goes into insolvent liquidation, and before that time, a director (or shadow director) knew or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation, but failed to take every step to minimize potential loss to creditors.
Common mistakes
Confusing the scope of wrongful trading (directors only) with fraudulent trading (anyone involved).
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