A director of a company will have breached their duty to prevent the company engaging in 'insolvent trading' if the company:

Question

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A director has a duty to prevent their company from trading while insolvent. This means that if there are reasonable grounds to suspect that the company is insolvent or will become insolvent, the director should take steps to prevent the company from incurring further debts. If the director fails to take those steps and the company continues to trade, the director can be held personally liable for any debts incurred by the company during that period. Trading with a company that is insolvent or on the verge of insolvency may also be a breach of the director's duty, but continuing to trade despite the company's insolvency is the clearest example of insolvent trading. Ceasing trade due to serious financial difficulty does not necessarily indicate insolvent trading.

A Director of a Company Will Have Breached Their Duty