Fraudulent and wrongful trading

In this lesson

1. 0:00 Fraudulent trading explained
2. 0:52 Wrongful trading and director duties
3. 2:30 Insider dealing crimes question

About this lesson

You'll also work through an exam-standard question on insider dealing to reinforce how these concepts apply in practice. Fraudulent trading occurs when a company continues operating with intent to defraud creditors. It's a criminal offence that can result in up to ten years imprisonment and director disqualification for 2 to 15 years. Any party knowingly involved can face both criminal and civil liability, plus personal liability to the company if they've profited from the fraud. Wrongful trading is different. It applies only to directors who knew or ought to have known insolvency was unavoidable, yet failed to take steps to minimise losses to creditors. Unlike fraudulent trading, it's purely a civil matter—not a crime. However, directors can still face personal liability and disqualification for failing to act responsibly. The lesson includes a worked example showing how documented board meetings that reveal awareness of deteriorating finances, without corresponding action, constitute wrongful trading. The exam question tests your ability to distinguish insider dealing offences: encouraging someone to deal, and passing on inside information, are both crimes. This reinforces how to spot the difference between criminal misconduct and regulatory failures like money laundering reporting obligations.

Duration: 4m