Trading While Insolvent?

[TDIPLC]

Guys,

Before I spend any more time/money on this, I'm hoping that a kindly PH'er may have some knowledge of the law regarding insolvency.

A client of ours (well known specialist car parts retailer) has gone into liquidation owing us some money.

It's not a lot of money so it isn't a major issue but the principal is important because he was dishonest with us, and he has a previous track record so some justice would be good.

He has alrady started a new company which will (presumably) carry on the (well known) brand name (or a version of it), so my question is whether it is possible to find out and prove whether the company was trading while insolvent, and if so, what can legally be done about it and what are the penalties.

Thanks for any advice.

[jamesuk28]

Trading while insolvent is an offence, or "Trading while insolvent without a reasonable expectation of trading back into a solvent position" is an offence, potentially renedering the directors personally liable for the companies debts.

However is virtually impossible to prove even in blatant cases so my advice is forget it.

Contact BERR and the insolvency service for more info.

[TDIPLC]

Thank you very much for your advice James

[Eric Mc]

In criminal law, "intent" often has to be proved against the defendant. In cases of trading whilst insolvent this "intention to defraud" is very, very difficult to prove. Most traders can claim that they were trying to trade their way out of the situation - but failed.

Fraud could only be proved if it was obvious that the director was drawing excessive amounts of money out of the company for himself - in other words, treating himself as a "prefferential creditor".

[TDIPLC]

Thank you Eric.

[johnfm]

There is new law on this. The is the old Fraudulent trading offence - which did require proof of intent to defraud.

There is an offence with a lower burden, I think it is trading while insolvent or simiar.

You need to speak to the liquidator/administrator.

[Eric Mc]

For the past 20 odd years there has also been "Wrongful Trading" which was a lower order offence compared to "fraudulent trading". It was an attempt to invent a charge that would be easier to obtain a conviction on. In reality, it has proved just as difficult to obtain a conviction for "wrongful trading" as for "fraudulent trading".