ABSTRACT
The chapter introduces the obligation of directors to avoid engaging in fraudulent trading, found in s 213 and s 246ZA of the Insolvency Act 1986 and s 993 of the Companies Act 2006, the former providing a civil action and the latter a criminal prosecution. It specifically provides some historical background to fraudulent trading and explains how and why the provision was enacted and the fact that it was eventually extended so as to provide administrators, as well as liquidators, with the power to bring proceedings for fraudulent trading. The chapter closes with an explanation of the aim of fraudulent trading, which is, for s 213 and s 246ZA, to compensate those who have lost out due to the actions of persons, who are identified in the section, engaging in fraudulent trading, and for s 993 to impose criminal penalties where the action is considered criminal.
