IF they have continued trading whilst knowingly insolvent that is potentially illegal as well as wrong.

“The key points to remember are if your company is insolvent, the directors have to take care. Under UK law, trading whilst insolvent can breach several provisions of the Insolvency Act 1986 which may have the effect of making directors of a company personally liable to contribute to the assets of a company.

The main provisions of the Insolvency Act 1986 that you should be aware of are:

Wrongful trading – Section 214 Insolvency Act 1986:

Transaction at an undervalue – Section 238 Insolvency Act 1986

Preference – Section 239 Insolvency Act 1986 (Unfair Preferences in Scotland s243)

If the company IS insolvent and if the board of the company continues to trade whilst it is insolvent, the directors of the company may become personally liable to contribute to the company’s assets and help meet the deficit to unsecured creditors if the company’s financial position is made worse by the directors continuing to trade, instead of putting the company immediately into liquidation.”