Can an insolvent company still trade legally?

An insolvent company may continue trading in certain circumstances, but directors must be very careful. Continuing to trade while insolvent is allowed if there is a reasonable prospect of rescuing the business and avoiding worsening the position of creditors. For example, directors might keep trading if they are in advanced discussions for refinancing or restructuring through a CVA. However, if trading only increases the debts with no realistic recovery plan, directors risk accusations of wrongful trading. Insolvency practitioners often advise companies to stop taking on new credit once insolvency is clear, unless it is essential to preserve value. Every decision should be carefully documented, showing that directors considered the interests of creditors above their own. Trading during insolvency can be a grey area, which is why professional advice is essential. In some cases, a short period of continued trading can protect jobs and enhance asset value, but reckless continuation may expose directors to personal liability.