wrongful trading claim

A wrongful trading claim occurs when company directors continue to run a business despite knowing it’s likely to fail and without taking reasonable steps to minimize losses to creditors. If the company later goes into insolvent liquidation, directors can be held personally liable for some of the debts incurred after they should have ceased trading. Essentially, it’s a legal way to hold directors accountable for misconduct that worsens the company’s financial situation and damages creditors’ interests during its decline.