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Company director found guilty of wrongful trading

Posted: 18th July 2011   In: Dispute Resolution, Corporate Commercial

A director has been found guilty of wrongful trading after taking money for services his company could not provide.

The director was the sole shareholder of a company that tried to provide a DX mailing service. He allowed an employee to market the business and take advance payments from customers who entered into contracts for DX services.

This money was then paid to the director and the employee for their personal benefit, even though the company was never in a position to provide those services.

The company was later wound up when the Revenue tried to recover outstanding VAT.

The liquidator sought a declaration that the director was guilty of misfeasance, breach of trust and wrongful trading.

The court granted the declaration saying that, at the very least, the director was negligent in taking money when the company was unable to provide the required services. There was no evidence that he exercised any control over the employee’s activities.

A reasonably diligent person, with the general knowledge, skill and experience expected of a sole director, would not have acted as he did. His actions showed a total disregard for his duties, which included protecting the company’s creditors.

Please contact us if you would like more information about the issues raised in this article.