Wrongful Trading and Director Liability in Corporate Insolvency: a Legal and Policy Analysis

Abstract

Wrongful trading laws, particularly as outlined in Section 214 of the UK Insolvency Act 1986, hold company directors personally liable when they allow a business to continue operating while insolvent. Drawing on theoretical perspectives and empirical findings from the UK and comparative jurisdictions, this paper reveals that while wrongful trading seeks to protect creditors and ensure director accountability, practical enforcement and deterrence remain weak. Policy reforms, including education and resilience-based frameworks, may improve the efficacy of wrongful trading regimes.