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The carrying on of the business of a company with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent effect, as set out under the Insolvency Act 1986, s 213.
Claims for fraudulent trading can be brought against anyone who was a knowing party to the carrying on of the business in question, not only directors, and any such person may be declared to be liable to make such contributions to the company's assets as the court thinks proper. Such claims can only be brought by the liquidator of the company in question in the course of its winding up.
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A summary checklist and timeline for bringing misfeasance, fraudulent trading and wrongful trading claims under sections 212, 213, 246ZA, 214 and 246ZB of the Insolvency Act 1986 Checklist This Checklist is in relation to claims under sections 212–214, 246ZA and 246ZB of the Insolvency Act 1986 (IA 1986), being commenced by an insolvency office-holder. For further reading on claims under IA 1986, ss 212–214, 246ZA and 246ZB generally, see Practice Notes: • Misfeasance claims under section 212 of the Insolvency Act 1986 • Fraudulent trading claims under sections 213 and 246ZA of the Insolvency Act 1986 • Wrongful trading claims under sections 214 and 246ZB of the Insolvency Act 1986 Step/action Time (days) Section/rule 1. Investigate the events and circumstances leading to the insolvency of the company and the matters giving rise to the claim(s) against the respondent(s). This would include obtaining the company's books and records, interviewing directors, former directors and any persons with information concerning the promotion, formation, business, dealings, affairs or property of the company.It...
Limited liability partnerships—application of Companies Act 2006 to LLPs—checklist The majority of law applicable to limited liability partnerships (LLPs) is actually modified company law rather than partnership law. The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009, SI 2009/1804 (2009 Regulations) apply many parts of the Companies Act 2006 (CA 2006), with appropriate modifications, to LLPs. The 2009 Regulations also apply Parts 1, 2, 3 and 5 of the Companies (Cross-Border Mergers) Regulations 2007, SI 2007/2974 to LLPs. The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008, SI 2008/1911 (2008 Regulations) apply parts of CA 2006 in relation to accounts and audit to LLPs with appropriate modifications. This Checklist sets out those provisions of CA 2006 that are applied to LLPs pursuant to these regulations. Companies Act 2006 (CA 2006), section Statutory instrument applying CA 2006 provision Subject Part 2—Company formation CA 2006, s 12A 2009 Regulations, SI 2009/1804, reg 3A (link accessible within SI 2009/1804, reg 4) (inserted by SI 2016/340, reg 5 and SI...
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A fraudulent trading claim arises under two separate statutory routes: •it is a criminal offence under section 993 of the Companies Act 2006•a civil remedy arises under sections 213 and 246ZA of the Insolvency Act 1986 (IA 1986)This Practice Note deals with the latter.What is fraudulent trading?Fraudulent trading is a claim which arises under IA 1986, s 213 (liquidation) or IA 1986, s 246ZA (administration) and seeks to recover property to the company's assets where:•the company has been wound up or entered administration, and•the business of the company was carried on with the intent:◦to defraud its creditors, and/or◦to defraud creditors of any other person(s), and/or◦for any other fraudulent purpose(s)In the circumstances, negligence or incompetence will not be sufficient.Who can commence a fraudulent trading claim?Historically, fraudulent trading claims could only be brought by a liquidator.However, since 1 October 2015 both liquidators and administrators can bring them.Aside from contextual differences, given that the wording of IA 1986, ss 213 and 246ZA is the same it is likely that the decisions concerning fraudulent...
Fraudulent tradingFraudulent trading by a company is an offence prohibited by section 993 of the Companies Act 2006 (CA 2006). Section 9 of the Fraud Act 2006 (FrA 2006), makes fraudulent trading by sole traders, partnerships and trusts and other non-corporate entities a criminal offence. See Practice Note: Fraudulent trading under the Fraud Act 2006.The offence under CA 2006, s 993 is triable either in the magistrates' court or the Crown Court.Elements of CA 2006 offence of fraudulent tradingThere are two limbs to this offence:•carrying on the business of a company with intent to defraud creditors of the company or the creditors of any other person, the elements of which are:◦carrying on the business of a company◦with intent to defraud creditors of the company or the creditors of any other person, and ◦knowingly being a party to that activity•carrying on the business of a company for any fraudulent purpose, the element of which are:◦carrying on the business of a company◦for a fraudulent purpose, and ◦knowingly being a party to that...
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Fraud risk management—code of ethics [Insert organisation name] takes great pride in the way we conduct our business. Our Code of ethics embodies the standards and policies under which we operate. It applies to us all. Please take care to read the Code, understand it and use it to guide you in your work. If you have any questions about the Code and its application, you should speak with [insert contact details]. 1 What is fraud? 1.1 Generally, fraud is a crime that involves deception or theft to gain an advantage. 1.2 The failure to prevent fraud offence under the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023) captures a wide range of fraud offences committed for the benefit of our organisation, including: 1.2.1 fraud by false representation; 1.2.2 fraud by failing to disclose information; 1.2.3 fraud by abuse of position; 1.2.4 obtaining services dishonestly; 1.2.5 participation in a fraudulent business; 1.2.6 false statements by company directors; 1.2.7 false accounting; 1.2.8 fraudulent trading; and 1.2.9 cheating the public revenue....
Corporate criminal liability—code of ethics 1 Introduction 1.1 [Insert organisation name] takes great pride in the way we conduct our business. Our Code of ethics embodies the standards and policies under which we operate. It applies to us all. Please take care to read the Code, understand it, and use it to guide you in your work. If you have any questions about the Code and its application, you should speak with [insert, eg your manager]. 1.2 [Insert organisation name] has a zero tolerance towards employees committing criminal acts. 1.3 From 26 December 2023, the Economic Crime and Corporate Transparency Act 2023 provides that where a senior manager, acting within the actual or apparent scope of their authority, commits a relevant offence, the organisation is also guilty of the offence. 2 Senior manager 2.1 A senior manager is someone who plays a significant role in: 2.1.1 making decisions about how the whole or a substantial part of the activities of the organisation are to be managed or organised; or 2.1.2...
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What is meant by the phrase ‘piercing the corporate veil’? A properly formed registered company is a separate legal entity from its shareholders and has separate rights and liabilities as a separate legal person. This principle is colloquially described as the corporate veil or the Salomon principle, being most famously stated by Lord MacNaghten in the case of Salomon v Salomon: The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act. A company, as a separate legal entity, continues to exist irrespective of changes to its membership. It owns its...
Is a liquidator under a duty to mitigate before commencing misfeasance proceedings against a director under section 212 of the Insolvency Act 1986 (IA 1986)? For example, if the underlying complaint is in respect of payments made contrary to IA 1986, s 127, does the liquidator have to pursue the recipients of the void payments first? Section 127 of the Insolvency Act 1986 (IA 1986), which only applies to compulsory liquidations, provides that: ‘In a winding up by the court, any disposition of the company's property, and any transfer of shares, or alteration in the status of the company's members, made after the commencement of the winding up is, unless the court otherwise orders, void.’ Once this provision (which does not apply to the liquidator) is triggered, it continues until the dissolution of the company following its winding up. Unless they have a valid defence, any recipient of the disposition may, depending on what property was disposed of, be ordered to either return that property or repay...
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This week's edition of Corporate Crime weekly highlights includes analysis of the new SFO guidance on what prosecutors must consider during corporate enforcement actions and of the risks associated with the government's bid to crack down on ransomware payments. Also included is news of major sentencing reforms to address the prison capacity crisis, of updated guidance from OTSI on reporting suspected trade sanctions breaches and of a £122.7m fine for Thames Water for wastewater operations failures and dividend payment breaches. All this, and more, in this week’s Corporate Crime highlights.
The Serious Fraud Office (SFO) has charged Jose Alejandro Zamora Yrala with fraudulent trading relating to aircraft parts supplier AOG Technics. The charges stem from alleged falsification of documentation for aircraft engine parts between 2019-2023, which led to aircraft groundings worldwide. The case involves a joint UK-Portuguese investigation, with Portuguese authorities conducting ten searches and making three arrests last week. Zamora Yrala will appear at Westminster magistrates' court on 2 June 2025. The investigation was completed in 19 months through international cooperation.
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(1)Â Â Â Â If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect.(2)Â Â Â Â The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above-mentioned are to be liable to make such contributions (if any) to the company's assets as the court thinks proper.
[(1)Â Â Â Â If while a company is in administration it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect.(2)Â Â Â Â The court, on the application of the administrator, may declare that any persons who were knowingly parties to the carrying on of the business in the manner mentioned in subsection (1) are to be liable to make such contributions (if any) to the company's assets as the court
Fraudulent trading is referenced 3 in UK Parliament Acts
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