Skip to Content
Skip to Main Menu

What is illegal trading and how do I avoid it?

Posted on: Wednesday 5th December, 2018

What is illegal trading and how do I avoid it?

You may be accused of trading illegally if you carry on trading when your company is insolvent, and in doing so, worsen the position of creditors. Although it’s incumbent on directors to stop trading under these circumstances, in reality this can be a complex scenario.

You may believe, for example, that by trading on, you’re doing your best for creditors and acting with the best intentions. Depending on the circumstances, however, the Official Receiver may deem your actions illegal if the company is later liquidated.

So what might be deemed illegal trading?

Deliberately attempting to defraud your creditors is regarded as illegal trading. This could include:

  • Continuing to accept credit from suppliers when you know you won’t be able to pay them
  • Accepting deposits from customers when your company can’t fulfil the orders
  • Transferring assets at below market value – perhaps to a family member
  • Making ‘preference payments’ to a lender – one with whom you have a personal guarantee, for example

Director Redundancy Calculator

How to avoid trading illegally

If you believe your company is approaching insolvency, it’s crucial to seek assistance from a licensed insolvency practitioner (IP). They will be able to guide you on your best options, bearing in mind the needs of creditors, and protect you from future allegations of illegal trading.

Essentially, you need to:

  • Carefully document all your income and expenditure
  • Make sure you act in the best interests of creditors
  • Ensure you don’t favour one creditor over another
  • Not deliberately sell your assets at undervalue

Illegal trading is a criminal offence that carries with it a possible prison sentence and/or potential personal liability for business debts. Our experts at Redundancy Claims UK can offer the reliable advice you need if you’re worried about trading illegally - call one of the team for a same-day meeting.


Close Menu