Trading whilst insolvent is not enough, in itself, to establish liability for wrongful trading. Liability will only be imposed if the directors also knew, or ought to have known, that there was no reasonable prospect of avoiding insolvent liquidation.

A company, which was profitable until 1980, became increasingly unprofitable until its liquidation in 1987. The directors continued to trade at a time when insolvency looked inevitable.

Prompt liquidation in July 1986, by which time the directors should have realized that insolvency was unavoidable, would have saved the company £75,000. The directors had therefore engaged in wrongful trading and were ordered to contribute £75,000 to the company’s assets.