What is fraudulent trading and how does it differ from wrongful trading?

Fraudulent trading is a much more serious offence than wrongful trading because it involves deliberate dishonesty. It occurs when company directors or managers carry on business with the intent to defraud creditors or for a fraudulent purpose. This could include knowingly accepting orders with no ability to fulfil them, falsifying company accounts, or transferring assets to avoid paying creditors. Unlike wrongful trading, which can happen through negligence or poor judgment, fraudulent trading requires intent. The consequences are severe: directors can face unlimited personal liability for company debts, director disqualification, and even criminal prosecution carrying the risk of imprisonment. Wrongful trading, by contrast, focuses on failure to act appropriately once insolvency is inevitable, regardless of intent. Both concepts underline the importance of directors seeking professional advice as soon as insolvency threatens, but fraudulent trading carries far harsher legal and reputational consequences.