Companies Act 2014 section 610

Civil liability for fraudulent or reckless trading of company

Section 610 sets out the circumstances in which a court may declare company officers or other persons personally liable, without any limit on that liability, for the debts of a company where they were involved in fraudulent or reckless trading.

• During a winding up, examinership, or rescue process, the court may declare that persons involved in reckless or fraudulent trading are personally responsible for all or part of the company's debts, with no cap on liability
• An officer may be found to have traded recklessly if they should have known their actions would likely cause losses to creditors, or if they allowed the company to incur a debt without honestly and reasonably believing the company could pay it when due alongside all its other obligations
• For reckless trading claims, the court can only make a declaration if the company is unable to pay its debts and the applicant actually suffered loss as a consequence of the reckless behaviour
• The court may reduce or remove personal liability where the person took all reasonably practicable steps to minimise losses from the point they knew or ought to have known their actions would likely cause harm to creditors