Wrongful Trading Solicitors

If your company is unable to pay its debts or you fear it may be that way soon, then you will need to work with an insolvency practitioner at the earliest opportunity to investigate and protect your employees from the fallout.

Failing to do so could leave you liable to a wrongful trading accusation. These can carry up to 15 year penalties, jail time, a criminal or civil offence conviction, and significant fines. However, a wrongful trading solicitor can help you avoid reaching this point altogether.

If you are unsure of your freedom to trade during a time of company financial struggle, then a wrongful trading solicitor can advise you on your legal rights and how to proceed.

To speak to one of our highly experienced wrongful trading dispute solicitors, please contact our Bournemouth office on 1202 292 424 or complete our online enquiry form and we’ll get back to you as soon as possible. Alternatively, send us an email at office@prestonredman.co.uk.

How our wrongful trading solicitors can help you

Preston Redman offers a range of services to help you with your wrongful trading dispute claim, including:

Defending accusations of wrongful trading
Making accusations of wrongful trading
Legal advice for your business

Defending accusations of wrongful trading

If you have been accused of wrongful trading, our solicitors can review the claim and help you understand the implications.

We will begin to gather evidence and build your defence case, aiming to resolve the matter out of court, using Alternative Dispute Resolution methods such as negotiation and mediation.

We can then provide advice on a way forward by working with our Business Recovery and Insolvency specialists.

Making accusations of wrongful trading

If you wish to make an accusation of wrongful trading or suspect that it’s happening and want clarification, we can help you identify and define the wrongdoings of the party at fault and build a case around those terms.

UK wrongful trading is region specific, so our Bournemouth based solicitors have the local knowledge and expertise to put forward your case.

Legal advice for your business

If you are looking for comprehensive legal advice on how to handle your company in times of hardship, our wrongful trading solicitors will listen to the decisions that you are facing and help you make the right decision for the betterment of your business and financial standing.

Our commercial solicitors have been supporting businesses and guiding managers for over 140 years throughout the UK and overseas.

Common questions about wrongful trading

What is wrongful trading?

Wrongful trading occurs when a company higher up —such as a director or a CEO—continues to trade when they know within reasonable doubt that the company they head cannot pay its debts. Most often, this will fall under what is called Insolvent trading, where the cash flow indicates that the business will fail to pay debts or has already done so.

Company managers are expected to make decisions that are in the best interests of their business, but by lying to their shareholders, they are risking the livelihoods of their employees and putting their creditors unknowingly in a worse position.

When facing insolvency, it is their responsibility to stop trading and prioritise the financial recovery of the company. Wrongful trading is the knowing failure to do so.

What are the types of wrongful trading?

There are two sorts of wrongful trading: wrongful trading and fraudulent trading. The difference is whether it is considered a criminal or civil offence, but both are certainly offences under the Wrongful Trading Companies Act of 2006 and the Insolvency Act of 1986.

Wrongful trading is a civil offence that carries penalties ranging from suspension to jail time and fines.

Fraudulent trading, meanwhile, is the knowing and deliberate intent to defraud and is, therefore, a criminal offence under the Insolvency Act of 1986.

This accusation carries much more severe penalties for the directors involved. In particular, the director(s) can lose the privilege of having their own personal financial responsibilities kept separate from that of the companies and may become charged with taking accountability for both.

How do you reduce the risk of wrongful trading?

There are precautions that business directors can take to avoid becoming liable for wrongful trading, including:

Consulting wrongful trading solicitors if they are uncertain about their standings.
Taking advice from business restructuring professionals who can produce a comprehensive overview of the company and suggest ways to recover assets and financial stability.
Produce accurate cash flow forecasts (or sensible predictions of the company’s financial future based on past data and market research).
Discuss these forecasts in meetings and be fully transparent about the company’s freedoms or lack thereof to trade.

World events can also affect the financial landscape, with an immediate example being the coronavirus outbreak and the launch of the Bounce Back Loan Scheme. There is help available in these circumstances, especially for new businesses trying to find their feet.

What are the consequences of wrongful trading?

Due to the potential impact that trading fraud can have on sometimes hundreds of employees, the wrongful trading penalties that a director could face if found guilty are quite severe.

The Insolvency Service can investigate a company, and if the company is found to be committing wrongful trading, then the directors can find themselves facing a Director Disqualification Order, in which they are banned for up to 15 years from being a company director. There is a potential for other restrictions to be implemented, such as becoming barred from being a pension trustee or a registered social landlord.

If these terms are broken, then the director faces up to 2 years in prison or a substantial fine.

If a director is found responsible due to Acts of Misfeasance, they could be held personally liable for company debts, which can be very significant.

Our wrongful trading dispute fees

Preston Redman aims to provide an accurate fee estimate for the cost of advising you on your wrongful trading claim.

Since it is a dispute, we are able to offer you a cost estimate that, should the circumstances of the case stay the same, will not change.

Our partners are always happy to discuss fees with our clients on an individual basis and will be transparent about any changes to pricing throughout the legal process.