ExpertMedium2 marksMultiple Choice
ACCA · Question 23 · Syllabus H: Corporate fraudulent and criminal behaviour
Under section 213 of the Insolvency Act 1986 (fraudulent trading), who can be held liable to make a contribution to the company's assets?
Under section 213 of the Insolvency Act 1986 (fraudulent trading), who can be held liable to make a contribution to the company's assets?
Answer options:
A.
Only the formally appointed directors of the company.
B.
Any person who was knowingly a party to the carrying on of the business with intent to defraud creditors.
C.
Only the shareholders of the company.
D.
The company's auditors.
How to approach this question
Distinguish between the scope of liability for fraudulent trading versus wrongful trading.
Full Answer
B.Any person who was knowingly a party to the carrying on of the business with intent to defraud creditors.✓ Correct
Unlike wrongful trading (s.214), which only applies to directors and shadow directors, fraudulent trading (s.213) can apply to 'any person' who knowingly participated in carrying on the business with intent to defraud creditors. This could include employees, advisors, or third parties.
Common mistakes
Assuming fraudulent trading only applies to directors, confusing it with wrongful trading.
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