Talk:Trading while insolvent (UK)
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This article needs a little help. It doesn't really accurately summarise the law of wrongful trading, and worse, it confuses wrongful trading with other, unrelated concepts, like unfair preferences. Legis 07:59, 7 July 2006 (UTC)
- I agree - I have drafted a page on wrongful trading and I think this page needs a lot of work. Not sure how it works if I just delete bits - but most of this page is wrong. Here goes! --BramleyBarn 15:17, 28 July 2006 (UTC)
[edit] Some deletions
I have deleted things from the main page that I think are misleading. I have drafted a page on wrongful trading, which is the term in the UK generally given to this phenomenon - I have moved the deleted things here. Please feel free to comment and put back if they are accurate in the US context. In the meantime I think they're safer here.
"In many legal systems (for example, under UK law, under the Insolvency Act 1986) a limited liability company may be held to be trading whilst insolvent when it is either unable to pay its debts as they fall due (cash-flow insolvent), or when the value of its assets is less than its liabilities (balance sheet insolvent)."
- This is misleading. The company is not liable for anything. The directors might be. Trading whilst insolvent in the UK is not an offence and indeed in some situations is recommended if the position of creditors would improve.
"Company directors owe a duty of care to the company, its shareholders, its employees and, if there is doubt as to its solvency, its creditors."
- This is also misleading. Very broadly (in UK law), whilst directors clearly owe a duty of care to the company, they only owe a duty to shareholders as a group, not individual shareholders, and unlikely that they owe anything to employees and creditors except in very exceptional circumstances.
"A limited company is a separate legal entity from its directors and shareholders; however, trading whilst insolvent can leave a director personally liable for:
- their own unpaid PAYE and National Insurance deductions;
- unpaid income tax where they have taken cash drawings from the company;
- personal guarantees given on behalf of the company;
- liability arising from trading after they ought to have realised that the business was ultimately bound to fail — this is known as "wrongful trading";
- liability where they have benefited from a transaction at an undervalue or preference;
- liability resulting from fraudulent trading."
- This seems to be repeating things that are said elsewhere and is a bit muddled. Is it not covered by wrongful trading?
All by --BramleyBarn 16:03, 28 July 2006 (UTC)
