Fraudulent trading

In company law, fraudulent trading is doing business with intent to defraud creditors.

[1] Where during the course of a winding-up, it appears to the liquidator that fraudulent trading has occurred, the liquidator may apply to the court for an order any persons who were knowingly parties to the carrying on of such business are to be made liable to make such contributions (if any) to the company's assets as the court thinks proper.

In practice, applications for orders in respect of fraudulent trading are rare because of the high burden of proof associated with fraud.

The effect of a successful application for fraudulent trading varies between different legal systems.

Fraudulent trading is entirely separate and distinct from "insider trading", which focuses purely upon the abuse of inside information in relation to financial markets for personal financial gain, and is wholly unrelated to creditor's rights or insolvency law.