Under section 213 of the Insolvency Act, if a company is wound up and it appears business has been carried out with the intention of defrauding creditors, the liquidator will investigate the individuals responsible for the running of the business and investigate the businesses activities.

Any person who knowingly continues to trade dishonestly to defraud, commits the offence, so it is not just company directors that can commit fraudulent trading. Any person who knowingly continues to trade dishonestly to defraud, commits the offence, so it is not just company directors that can commit fraudulent trading.

If a company has been set up with the intention to defraud creditors, this is often referred to as either:

Long firm fraud - small trading accounts are set up to build up trust and a good credit rating with a supplier before a large quantity of goods is ordered with failure to pay. Or; Short firm fraud - there is no attempt to build trust, goods are simply ordered but never paid for. Commercial and business fraudulent trading in the UK is wide-ranging and can involve investigations and prosecutions brought by a number of different Government agencies, including HM Revenue and Customs, the Crown Prosecution Service (COS, the Financial Services Authority (FCA) and the Serious Fraud Office (SFO), to name but a few.

Inevitably, investigations conducted by the Police, in conjunction with the Serious Fraud Office, into complex allegations of fraud can be lengthy and have a devastating impact upon the individuals and businesses who are suspected of involvement in fraudulent and wrongful trading.