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after they have, and are known to have, gone beyond the point of
no return, Members felt that this concept of wrongful trading and
the liability therefore still suffers from an undesirable degree of
uncertainty. For instance: when is a company unable to pay its
debts as they fall due? It may have the asset value but not the
cash. It may be able to pay all its debts tomorrow but not to-day.
When is there no reasonable prospect of the company meeting its
liabilities? When ought an officer of the company to have known that
the trading was wrongful?
11.6
Members felt that the draft clause suggested by the Cork
Committee was very complicated, suffered from a degree of uncertainty
and, at sub-clause (6), would involve the court in taking decisions
regarding the day-to-day operations of companies which, by definition,
were already in serious financial difficulties.
Of course, the Cork
Committee stressed that their clause was not intended to be definitive
but even if it were reduced into proper legislation form, Members were
worried that it would not be any better than Section 15 of the Insolvency
Act 1985.
11.7
Having regard to the obvious problems in defining Wrongful
Trading and to the forebodings of experts about the practicability of
the provisions which have been enacted in Britain we have decided that
the sensible approach is to defer a decision on the matter until there
has been a reasonable opportunity to see how the British provisions work
out in practice.
11.8
During the discussions on Wrongful Trading, the question was
raised of whether non-executive directors should be subject to the
same liabilities as their executive colleagues.
This is a point with
implications for many other sectors of company law and we have therefore
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