On 15th October, Morrison & Foerster LLP published a briefing concerned with a recent High Court decision involving fraudulent trading under section 213 of the Insolvency Act 1986.  It says that the case involves a ground of liability rarely invoked, although it is an important remedy for insolvency practitioners, particularly since it can be raised where the insolvent company’s assets overall have not been diminished in the course of trading – in contrast to ‘wrongful trading’ under section 214.  Fraudulent trading is both a criminal offence and a civil liability – and can be fraud against anyone, not just the creditors of the company.  It is said that the case shows that dishonesty is a requisite component in establishing liability.  The briefing says that the Court also considered whether there is fraudulent trading if a company incurs a new liability in circumstances in which the liability provides no benefit to the company and which liability the company has no intention of servicing or repaying.  The briefing concludes that the test for dishonesty in fraudulent trading is now the same whether it is a claim for civil liability or when charged as a crime; incurring debt for the company that directors know the company cannot repay can stray into fraudulent trading; and a claim under section 213 may arise not only against directors but also corporate advisers when new liabilities are being incurred.

This blog is primarily for my own use, to keep informed and up to date. However, if you would like to say thank you (and perhaps help me get a new, better laptop when I am away…) you can “buy me a coffee” at

Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: