Fraudulent Trading Legal Advice

Fraudulent trading is an abuse of position of responsibility or power at the corporate level, carried out by a director, high-level employee or former employee which results in the business suffering financial loss.

Examples of fraudulent trading include :-

• the misappropriation of company funds for personal gain,

• abuse of expenses schemes, or

• employees diverting business to themselves for their personal gain.

• fraud in the lead up to insolvency

If you or your business are the victims of fraudulent trading acting quickly is vital. If the evidence is clear that money has been misappropriated, we can help you take immediate action for an Injunction. This will help to capture and freeze the Defendant’s assets to make sure that your money does not go anywhere.

From there we can work with you to navigate this complex area. We can then build a strong case to give you the best opportunity to recover your money.

Legal liability, in the criminal sense, after fraudulent trading, depends on the type of fraud and underlying situation. In some cases, the Fraud Act or Theft Act may apply, but where the fraudulent trading relates to insolvency the Insolvency Act will apply. There can be crossover and so you will need expert assistance if you are  a defendant, on technical legal issues such as deceit, conspiracy, breach of trust and/or duty of care. Civil law may also apply such as conversion, breach of contract or claims for restitution.

The law states that only managerial staff or persons within senior controlling roles in a company may be charged with committing fraudulent trading. However, mid-level and junior staff can still be charged with aiding in the offence. This does complicate matters for junior staff that may be aware of matters but feel unable to come forward or do anything about it.

To prove fraudulent trading requires more than simply proving that the perpetrator set out with intent to defraud a creditor, a senior member of staff may still be charged with fraudulent trading. This applies if a senior staff member knew of it and turned a blind eye. It could also be even if they traded believing that later in insolvency the creditor would have their account settled.

Fraudulent Trading When Insolvent

Fraudulent trading cases involve a company that has become insolvent. In this context if company directors have traded on when the business is clearly insolvent, have siphoned off assets or sold them cheaply to connected persons or otherwise acted deliberately with an intent to disadvantage creditors, an appointed Insolvency Practitioner will investigate (and is duty bound to investigate the directors conduct in the lead up to insolvency in any event) and recommend that civil and/or criminal offences have occurred. A director may face personal liability to pay back losses, disqualification as a director and at the extreme, a prison sentence of up to 10 years.

For more information on fraudulent trading or fraud relating to abuse of position, please contact us.