Miscellaneous Statutory and Common Law Offences

Fraudulent Trading

Actions for fraudulent trading are possible only when the company is in the process of being wound up voluntarily or due to insolvency. A director is liable if he is knowingly a party to fraudulent trading, i.e. if he carried on the company's business either with intent to defraud creditors, whether the company's or someone else's or for some other fraudulent purpose.

The offence is punishable on conviction on indictment with seven years' imprisonment.

Companies Act 1985 s. 458

....if any business of a company is carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, every person who was knowingly a party to the carrying on of the business in that manner is liable to imprisonment or a fine, or both.......

Company Directors Disqualification Act 1986 S.4

As amended by the Insolvency Act 2000

A company director who has been involved in fraud may be disqualified from acting as a director.

(1) The court may make a disqualification order against a person if, in the course of the winding up of a company, it appears that he

(a) has been guilty of an offence for which he is liable (whether he has been convicted or not) under section 458 of the Companies Act (fraudulent trading), or

(b) has otherwise been guilty, while an officer or liquidator of the company receiver of the company's property or administrative receiver of the company, of any fraud in relation to the company or of any breach of his duty as such officer, liquidator, receiver or administrative receiver

(2) In this section "the court" means any court having jurisdiction to wind up any of the companies in relation to which the offence or other default has been or is alleged to have been committed; and "officer" includes a shadow director.

(3) The maximum period of disqualification under this section is 15 years.