ACCA · Question 58 · Insolvency law
Scenario: 'GeoThermal Grid Ltd' is facing severe financial difficulties. The directors realize the company cannot avoid insolvent liquidation, but they continue trading for six months, incurring £500,000 in new debts. Just before liquidation, they repay a £50,000 loan to the Managing Director's brother, while ignoring other creditors.
Question: Under the Insolvency Act 1986, what civil liability do the directors face for continuing to trade and incur debt when they knew insolvency was unavoidable?
Answer options:
Fraudulent trading.
Wrongful trading.
Misfeasance.
No liability, as companies have limited liability.
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