Wrongful trading is the practice of when a director continues trading when they knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation.
How does A Wrongful Trading Claim Work?
The Insolvency Act 1986 includes a route of recourse for liquidators against directors of companies who are found to have traded wrongfully. This method of recourse involves the use of a court declaration that the director must contribute to the company’s assets in order to ensure creditors receive as close to the sums they are rightfully owed.
Through our panel solicitors, we can assist in bringing a no win, no fee claim against directors who you believe to have traded wrongfully and against whom a declaration ought to be made.
How do you Prove Wrongful Trading?
In bringing a claim for wrongful trading, the pursuer first has to establish that a director knew or ought to have concluded that there was no reasonable prospect of the company avoiding insolvent liquidation. In doing this, the pursuer must point to a “relevant period” where this trading has taken place. That period is to be from when the director first realised (or ought to have known) that there was no reasonable prospect of the company avoid liquidation up to the time they went into liquidation.
The pursuer has to convince the court that the facts known, conclusions reached and steps taken were those that would have been taken by a reasonably diligent person having both:
- “The general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company, and
- The general knowledge, skill and experience that that director has.
Once this has been established, the onus is on the director to show that they had taken every step to minimise the potential loss to creditors. In doing so, the defender has to convince the court that, on a net basis, the company wasn’t worse off as a result of the continued wrongful trading.
Why choose Alba Claims for Wrongful Trading Claims?
Ultimately, a claim for wrongful trading can be a convoluted process and it can be difficult to establish that a director has indeed traded wrongfully. However, bringing a claim via Alba Claims on a “no win, no fee” basis can mitigate any risk for you in pursuing such a claim.
Get in touch with us if you think there has been wrongful trading and you would like to pursue a claim.
