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ACCA Applied Skills · Corporate and Business Law (Global) · Insolvency and administration

Vantage Ltd is in insolvent liquidation. Its directors, Lena and Omar, are found liable for wrongful trading. Which statement about the effect on their position is most accurate?

Directors liable for wrongful trading can be ordered to contribute to the company's assets, and they can also be disqualified from acting as directors for unfitness. Disqualification does not need a criminal conviction, and contributions go to the liquidator for all creditors.

  1. AThe court may order contribution to the assets and may also disqualify them from acting as directorsCorrect
  2. BThe court may order contribution but disqualification is impossible without a criminal conviction
  3. CThe court may disqualify them but cannot order any contribution to assets
  4. DAny sum ordered is paid directly to the creditors who suffered loss, not into the company's assets

Explanation

A wrongful trading declaration leads to a contribution order, and any amount is paid to the liquidator for the assets available to creditors generally. Separately, disqualification can be ordered on grounds such as unfit conduct in an insolvent company, without needing a criminal conviction. So the other options misstate either the remedies or the destination of the money.

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