What is fraudulent trading and what are the penalties?

Fraudulent trading is a serious offence that involves deliberately carrying on business with the intent to defraud creditors or for a fraudulent purpose. Unlike wrongful trading, which can occur through negligence, fraudulent trading requires intent. Examples include falsifying accounts, hiding assets, or accepting orders knowing they cannot be fulfilled. The penalties are severe and can include unlimited personal liability for company debts, director disqualification, and even criminal prosecution with the possibility of imprisonment. Insolvency practitioners and courts investigate evidence of fraudulent trading during liquidation or administration. Directors found guilty may also face reputational ruin and be barred from holding corporate positions. The best defence is to avoid dishonesty entirely, maintain transparency, and ensure all business dealings are carried out in good faith. Fraudulent trading is rare but treated extremely seriously under UK insolvency law.