Wrongful trading and company directors : a study of the UK Insolvency Act 1986 and the Maltese Companies Act XXV of 1995

Abstract

The wrongful trading provisions have introduced some important changes in respect of the personal liability of company directors for the debts of their companies. In particular the concept of wrongful trading is potentially significant for directors as they may now find that they are held personally liable for the company's debts where it can be shown that their behaviour has fallen foul of the standards required by the section. This thesis addresses some of the issues to be considered by the directors of a company if its solvency is in doubt. These are the issues that need to be considered if the company has reached, or will shortly reach, the point where, without additional investment or finance, it no longer has sufficient funding to discharge all its liabilities, including those which would arise on a winding up of the company. This thesis provides guidance on directors' responsibilities if and when the "line is crossed" and the company's liabilities exceed its assets. In these circumstances the company is technically insolvent, even if it is in a position to meet its current liabilities as they fall due. The purpose of this thesis is to examine the role of the wrongful trading provisions in relation to companies in financial difficulties. Also of relevance is the question of the possible disqualification of directors as a result of a wrongful trading action having been successfully brought against a director and the legal provisions relating to this are examined.