ABSTRACT
The difficulties and inadequacies of the law relating to fraudulent trading were examined by the Cork Committee which reported in 1982.123 The main problems with the interpretation and application of the fraudulent trading provisions, which prevent them from operating as an effective compensatory remedy, is the reluctance of the courts to declare civil liability except in cases where there has been dishonesty; furthermore, the courts insist upon a strict standard of proof. Both of these problems stem from the fact that fraudulent trading has both a criminal and a civil aspect and the courts maintain the same requirements. The Cork Committee was of the view that civil fraudulent trading should be abolished and that a new provision be enacted which did not require dishonesty to be proven and which would apply in cases of not only fraudulent but also unreasonable trading. This new concept was to be known as wrongful trading and, although the legislature retained civil fraudulent trading, it did adopt this main proposal and enacted the wrongful trading provision in the Insolvency Act 1985. It is now to be found in s 214 of the Insolvency Act 1986.124
The major advance brought about by the introduction of the notion of wrongful trading is that considerable personal liability can be imposed on those persons who have run a company where the company has gone into insolvent liquidation, even where those persons have not acted dishonestly and that, for the purposes of the section, their conduct is to be judged by reference to an objective standard.
