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

Zeta Ltd is in insolvent liquidation. The liquidator alleges that Maria, a director, continued to trade after she knew there was no reasonable prospect of avoiding insolvent liquidation. Under the general wrongful trading rule applied in LW (Global), what is the main remedy a court may order against Maria?

The court may order the director to make a contribution to the company's assets. Wrongful trading is a civil liability arising in insolvent liquidation, and the amount is at the court's discretion. It does not itself carry imprisonment or cancellation of shares.

  1. AA contribution to the company's assets, at the court's discretionCorrect
  2. BAutomatic imprisonment for up to seven years
  3. CCancellation of all shares held by Maria
  4. DRepayment of all dividends paid to every shareholder

Explanation

Wrongful trading is a civil matter. The court may order a director to contribute to the company's assets, an amount at its discretion. Imprisonment relates to criminal fraud, not the civil wrongful trading remedy, so that option is wrong.

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