Fraudulent Trading


Section 993 of the Companies Act 2006 states the following:

(1)If any business of a company is carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, every person who is knowingly a party to the carrying on of the business in that manner commits an offence.

(2)This applies whether or not the company has been, or is in the course of being, wound up.

If convicted for fraudulent trading the maximum sentence at the Crown Court is ten years imprisonment and/or a fine.

The sentencing range can vary considerably depending on the facts of the case. If the Court is of the view that the Company has only been created with a view to defrauding creditors for the benefit of the directors the sentence will be at the higher end of the scale. If the Court determines on the other hand that the Company had simply continued to trade, when they should not have done, simply to protect the company and its employees, then the sentence will be much lower.

Typically a charge of fraudulent trading will arise when a company continues to trade, and obtain products and credit, when they have in fact become insolvent.

Fraudulent trading however does not have to be limited to the defrauding of creditors; it has been held that the fraudulently obtaining of an air travel organiser’s licence involved fraudulent trading.

The Court has held that fraudulent trading can be committed only by persons who exercise some kind of controlling or managerial function within the company. However employees may also be liable as secondary parties to offences committed by company directors or senor managers. Shadow directors may also be prosecuted for fraudulent trading if it can be shown that they were exercising managerial control over the company.

Our business crime solicitors have extensive experience of defending the full range of fraud offences including fraudulent trading.

If you have been arrested or asked to attend an interview then please contact us immediately.

If you currently have solicitors but wish to change criminal lawyers please contact us to discuss your options.

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