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maintained in section 213 of the Insolvency Act 1986 and the criminal liability
regarding it is now governed by section 993 of the Companies Act 2006.
In this section, the UK Court‟s interpretations of the three sections and its
assessment on the provisions will be examined. In analysing the court‟s
decisions, reference will be made to both pre-1986 as well as post-1986 cases on
fraudulent trading because the courts do not preclude them from being used for
the new section. Similarly, when looking at the criminal aspect of fraudulent
trading, the same cases as the civil liability will be referred to because both
sections are alike. The only difference between the two sections is regarding the
consequences of such liability.
10.3.1 Fraudulent Trading under Section 213 Insolvency Act 1986
Section 213 of the Act states
(1) “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) 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.”
There are three components which must be proven by the liquidator, namely:
a) Party knowingly;
b) carrying on of the business; and
c) intent to defraud creditors or for any fraudulent purposes.
These elements will be examined in detail below.
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