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Formal Consolidation |  2020 RevEd
Responsibility for wrongful trading
239.—(1)  If, in the course of the judicial management or winding up of a company or in any proceedings against a company, it appears that the company has traded wrongfully, the Court, on the application of any person mentioned in subsection (5), may, if it thinks proper to do so, declare that any person who was a party to the company trading in that manner is personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court directs, if that person —
(a)knew that the company was trading wrongfully; or
(b)as an officer of the company, ought, in all the circumstances, to have known that the company was trading wrongfully.
(2)  Where the Court makes any declaration under subsection (1), the Court may relieve, in whole or in part and on such terms as the Court thinks fit, the person declared responsible under that declaration from the personal liability for which he or she is declared responsible, if —
(a)the person acted honestly; and
(b)having regard to all the circumstances of the case, the person ought fairly to be relieved from the personal liability.
(3)  Where the Court makes any declaration under subsection (1), it may give such further directions as the Court thinks proper for the purpose of giving effect to that declaration, and in particular —
(a)may make provision for making the liability of any person under the declaration a charge —
(i)on any debt or obligation due from the company to the person liable; or
(ii)on any charge or any interest in any charge on any assets of the company held by or vested in —
(A)the person liable;
(B)any corporation or other person on behalf of the person liable; or
(C)any person claiming as assignee from or through the person liable or any corporation or other person acting on behalf of the person liable;
(b)may from time to time make such further order as is necessary for the purpose of enforcing any charge imposed under this subsection; and
(c)may provide that sums recovered under this section be paid to such persons or classes of persons, for such purposes, in such amounts or proportions, at such times and in such priorities between them as the Court may specify.
(4)  For the purpose of subsection (3)(a)(ii)(C), “assignee” —
(a)includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation or charge was created, issued or transferred or the interest created; but
(b)does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.
(5)  The following persons may make an application under subsection (1):
(a)the judicial manager of the company;
(b)the liquidator of the company;
(c)the Official Receiver;
(d)any creditor or contributory of the company, with the leave of —
(i)the judicial manager or the liquidator, as the case may be; or
(ii)the Court.
(6)  Where a company has traded wrongfully, every person who was a party to the wrongful trading and who —
(a)knew that the company was trading wrongfully; or
(b)as an officer of the company, ought, in all the circumstances, to have known that the company was trading wrongfully,
shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both.
(7)  Subsection (6) applies to a company whether or not it has been, or is in the course of being, wound up, and whether or not it has been, or is, in judicial management.
(8)  This section has effect even if the person concerned is criminally liable apart from this section in respect of the matters on the ground of which the declaration is made.
(9)  On the hearing of an application under subsection (1), the judicial manager or liquidator may give evidence or call witnesses.
(10)  Any company or (with the company’s consent) any person party to or interested in becoming party to the carrying on of the business of the company, may apply to the Court for a declaration as to whether a particular course of conduct, a particular transaction or a particular series of transactions of the company at the time of and after such application would constitute wrongful trading and on any such application the Court may, on such terms and conditions as the Court thinks fit, declare that such course of action, transaction or series of transactions does not constitute wrongful trading within the meaning of this section.
(11)  The Court, when making a declaration under subsection (10), may include provisions to ensure the confidentiality or publication of the declaration, the terms and conditions of the declaration, or any part of the declaration or terms and conditions.
(12)  For the purposes of this section, a company trades wrongfully if —
(a)the company, when insolvent, incurs debts or other liabilities without reasonable prospect of meeting them in full; or
(b)the company incurs debts or other liabilities —
(i)that it has no reasonable prospect of meeting in full; and
(ii)that result in the company becoming insolvent.
Informal Consolidation | Amended Act 25 of 2021
Responsibility for wrongful trading
239.—(1)  If, in the course of the judicial management or winding up of a company or in any proceedings against a company, it appears that the company has traded wrongfully, the Court, on the application of any person mentioned in subsection (5), may, if it thinks proper to do so, declare that any person who was a party to the company trading in that manner is personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the Court directs, if that person —
(a)knew that the company was trading wrongfully; or
(b)as an officer of the company, ought, in all the circumstances, to have known that the company was trading wrongfully.
(2)  Where the Court makes any declaration under subsection (1), the Court may relieve, in whole or in part and on such terms as the Court thinks fit, the person declared responsible under that declaration from the personal liability for which he or she is declared responsible, if —
(a)the person acted honestly; and
(b)having regard to all the circumstances of the case, the person ought fairly to be relieved from the personal liability.
(3)  Where the Court makes any declaration under subsection (1), it may give such further directions as the Court thinks proper for the purpose of giving effect to that declaration, and in particular —
(a)may make provision for making the liability of any person under the declaration a charge —
(i)on any debt or obligation due from the company to the person liable; or
(ii)on any charge or any interest in any charge on any assets of the company held by or vested in —
(A)the person liable;
(B)any corporation or other person on behalf of the person liable; or
(C)any person claiming as assignee from or through the person liable or any corporation or other person acting on behalf of the person liable;
(b)may from time to time make such further order as is necessary for the purpose of enforcing any charge imposed under this subsection; and
(c)may provide that sums recovered under this section be paid to such persons or classes of persons, for such purposes, in such amounts or proportions, at such times and in such priorities between them as the Court may specify.
(4)  For the purpose of subsection (3)(a)(ii)(C), “assignee” —
(a)includes any person to whom or in whose favour, by the directions of the person liable, the debt, obligation or charge was created, issued or transferred or the interest created; but
(b)does not include an assignee for valuable consideration (not including consideration by way of marriage) given in good faith and without notice of any of the matters on the ground of which the declaration is made.
(5)  The following persons may make an application under subsection (1):
(a)the judicial manager of the company;
(b)the liquidator of the company;
(c)the Official Receiver;
(d)any creditor or contributory of the company, with the permission of —
(i)the judicial manager or the liquidator, as the case may be; or
(ii)the Court.
[Act 25 of 2021 wef 01/04/2022]
(6)  Where a company has traded wrongfully, every person who was a party to the wrongful trading and who —
(a)knew that the company was trading wrongfully; or
(b)as an officer of the company, ought, in all the circumstances, to have known that the company was trading wrongfully,
shall be guilty of an offence and shall be liable on conviction to a fine not exceeding $10,000 or to imprisonment for a term not exceeding 3 years or to both.
(7)  Subsection (6) applies to a company whether or not it has been, or is in the course of being, wound up, and whether or not it has been, or is, in judicial management.
(8)  This section has effect even if the person concerned is criminally liable apart from this section in respect of the matters on the ground of which the declaration is made.
(9)  On the hearing of an application under subsection (1), the judicial manager or liquidator may give evidence or call witnesses.
(10)  Any company or (with the company’s consent) any person party to or interested in becoming party to the carrying on of the business of the company, may apply to the Court for a declaration as to whether a particular course of conduct, a particular transaction or a particular series of transactions of the company at the time of and after such application would constitute wrongful trading and on any such application the Court may, on such terms and conditions as the Court thinks fit, declare that such course of action, transaction or series of transactions does not constitute wrongful trading within the meaning of this section.
(11)  The Court, when making a declaration under subsection (10), may include provisions to ensure the confidentiality or publication of the declaration, the terms and conditions of the declaration, or any part of the declaration or terms and conditions.
(12)  For the purposes of this section, a company trades wrongfully if —
(a)the company, when insolvent, incurs debts or other liabilities without reasonable prospect of meeting them in full; or
(b)the company incurs debts or other liabilities —
(i)that it has no reasonable prospect of meeting in full; and
(ii)that result in the company becoming insolvent.