SCENARIO 5: Titanium Foundry Ltd went into insolvent liquidation on 1 November. Six months prior, on 1 May, when the company was already hopelessly insolvent, the directors granted a floating charge over the company's inventory to a connected person (the CEO's brother) to secure an old, existing debt of £50,000. No new money was advanced to the company.
Under Section 245 of the Insolvency Act 1986, what is the status of this floating charge?
ACCA · Question 59 · Corporate and Business Law
SCENARIO 5: Titanium Foundry Ltd went into insolvent liquidation on 1 November. Six months prior, on 1 May, when the company was already hopelessly insolvent, the directors granted a floating charge over the company's inventory to a connected person.
The liquidator discovers that from 1 May to 1 November, the directors knew the company could not avoid liquidation, but they continued trading anyway, incurring an additional £200,000 in debts to suppliers. What action can the liquidator take against the directors personally?
Answer options:
Bring a claim for fraudulent trading under s.213.
Bring a claim for wrongful trading under s.214 of the Insolvency Act 1986 to make them contribute to the company's assets.
Sue the directors for breach of contract on behalf of the suppliers.
Nothing, because directors are protected by limited liability.
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