ExpertACCA · Question 56 · Syllabus H: Corporate fraudulent and criminal behaviour
Scenario: Titanium Forge plc has three directors: Alan, Brenda, and Charles. Alan recently discovered a lucrative opportunity to supply steel to a new bridge project. Without telling the board, Alan set up his own company to take the contract. Brenda, the finance director, failed to notice that Titanium Forge was trading while insolvent for six months. Charles rarely attends board meetings.
If Titanium Forge plc goes into insolvent liquidation, what is Brenda's potential liability regarding her failure to notice the insolvency?
Scenario: Titanium Forge plc has three directors: Alan, Brenda, and Charles. Alan recently discovered a lucrative opportunity to supply steel to a new bridge project. Without telling the board, Alan set up his own company to take the contract. Brenda, the finance director, failed to notice that Titanium Forge was trading while insolvent for six months. Charles rarely attends board meetings.
If Titanium Forge plc goes into insolvent liquidation, what is Brenda's potential liability regarding her failure to notice the insolvency?
Answer options:
She may be liable for fraudulent trading under s.213 Insolvency Act 1986.
She may be liable for wrongful trading under s.214 Insolvency Act 1986, as she ought to have concluded there was no reasonable prospect of avoiding insolvent liquidation.
She has no liability as she did not actively steal from the company.
She is only liable if she personally guaranteed the company's debts.
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