Wrongful Trading
A civil liability under s.214 Insolvency Act 1986. A director of a company in insolvent liquidation may be ordered to make a personal contribution to the company's assets if they allowed the company to continue trading when they knew, or ought to have concluded, there was no reasonable prospect of avoiding insolvent liquidation.
Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.
Section 214 of the Insolvency Act 1986 creates personal liability for directors who keep a failing company going past the point of no return. It applies where, at some time before the commencement of the winding up of the company, that person knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation.
Where the test is met, the court may declare that the director is to be liable to make such contribution (if any) to the company's assets as the court thinks proper — a personal liability distinct from, and additional to, the loss of limited liability protection that insolvency itself does not otherwise remove. The provision has at times been temporarily suspended, including during the coronavirus pandemic, to give struggling but otherwise viable companies room to keep trading.
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Official sources
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