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Wrongful Trading

Wrongful Trading

Does anyone know of any company directors who have been prosecuted for 'Wrongful Trading'? The company I work at is clearly insolvent (to me at any rate however I am only the lowly bookkeeper) I can't understand how they are allowed to carry on with such massive PAYE arrears which HMRC are fully aware of.


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01st Dec 2012 10:43

Yes I know of several directors who have been prosecuted but this only happens after the company has been wound up  It is only a matter of time before HMRC will take action on your situation No-one can predict with certainty as it differs from case to case

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01st Dec 2012 18:38

Don't forget

That it is perfectly legal to continue to trade if there is a reasonable expectation that the company will be able to trade through the situation.  In my experience the degree of expectation is in direct proportion to the directors' salaries!

Also don't forget that there may be things going on of which you are unaware.  The company may have intangible worth that is not reflected in the balance sheet and the directos may be in the process of finding a buyer for the business.

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06th Dec 2012 14:22

and remember also

that a company with a net deficit is only trading insolvently if it cannot meet its liabilities as they fall due.

Directors (or optimistic, but daft, employees) are occasionally prepared to make payments on behalf of the company, particularly OMBs. In these cases the company will be meeting its liabilities as they fall due and can trade on (in a similar way to A.N. Other borrowing off their mum/dad/mate to pay their credit card on time). 

If you then prepare statutory accounts on a going concern basis, the notes should include a declaration of the support under the 'basis of preparing accounts' policy. Generally this seems acceptable when given for a period not less than 12 months from date of approval of the accounts.

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