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ACCA Applied Skills · Corporate and Business Law (Global) · Fraudulent and criminal behaviour

Lena is a director of Orbit Ltd. She is accused of fraudulent trading because she knowingly ran the business to defraud a supplier. Which statement distinguishes fraudulent trading from wrongful trading?

Fraudulent trading requires proof of intent to defraud creditors or others, which means dishonesty, and may also be criminal. Wrongful trading requires no dishonesty and is assessed on what a reasonably diligent director would have concluded about insolvency.

  1. AFraudulent trading requires intent to defraud, which is not needed for wrongful tradingCorrect
  2. BFraudulent trading applies only to shadow directors
  3. CWrongful trading can be committed only by dishonest directors
  4. DFraudulent trading can arise only when the company is solvent

Explanation

Fraudulent trading requires actual dishonest intent to defraud creditors or others, and can also be a criminal offence. Wrongful trading is judged by an objective standard of knowledge or reasonable diligence and requires no dishonesty. The other options misstate who can be liable.

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