Insolvency Act 1986, section 214

Wrongful trading

Part IV Winding Up of Companies Registered under the Companies Acts

(1)Subject to subsection (3) below, if in the course of the winding up of a company it appears that subsection (2) of this section applies in relation to a person who is or has been a director of the company, the court, on the application of the liquidator, may declare that that person is to be liable to make such contribution (if any) to the company’s assets as the court thinks proper.

(2)This subsection applies in relation to a person if—

(a)the company has gone into insolvent liquidation,

(b)at some time before the commencement of the winding up of the company, that person knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation [F457or entering insolvent administrationF457] , and

(c)that person was a director of the company at that time;

but the court shall not make a declaration under this section in any case where the time mentioned in paragraph (b) above was before 28th April 1986.

(3)The court shall not make a declaration under this section with respect to any person if it is satisfied that after the condition specified in subsection (2)(b) was first satisfied in relation to him that person took every step with a view to minimising the potential loss to the company’s creditors as ( [F458on the assumption that he had knowledge of the matter mentioned in subsection (2)(b)F458] ) he ought to have taken.

(4)For the purposes of subsections (2) and (3), the facts which a director of a company ought to know or ascertain, the conclusions which he ought to reach and the steps which he ought to take are those which would be known or ascertained, or reached or taken, by a reasonably diligent person having both—

(a)the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company, and

(b)the general knowledge, skill and experience that that director has.

(5)The reference in subsection (4) to the functions carried out in relation to a company by a director of the company includes any functions which he does not carry out but which have been entrusted to him.

(6)For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.

[F459 (6A)For the purposes of this section a company enters insolvent administration if it enters administration at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the administration.F459]

(7) In this section “director” includes a shadow director.

(8)This section is without prejudice to section 213.

Definitions used in section 214 2

the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act
enters administration

(b) a company “enters administration” when the appointment of an administrator takes effect,

Defined in Sch.B1 para.1(2) · see it in the full Act

Cases considering section 214 80

BTI 2014 LLC v Sequana SA and others

[2022] UKSC 25 · 5 October 2022Interprets

Wrongful trading has a later and more demanding trigger than the creditor-interest rule. It applies when insolvent liquidation or administration cannot reasonably be avoided and imposes an objective obligation to minimise creditors’ loss. Its scope, procedure and remedies do not displace the fiduciary rule (see paras [92]-[99]; [121]-[124]; [230]-[239]). The statutory trigger is the point when a director knew or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation or administration. That trigger is later than the potential engagement of the fiduciary rule (see paras [93]-[99]; [121]-[124]). A director avoids wrongful-trading liability by taking every step which ought to have been taken to minimise potential loss to creditors. This objective standard is more onerous than the good-faith fiduciary duty (see paras [93]-[99]; [121]-[122]). The provision combines the knowledge and experience expected of a reasonably diligent person with those actually possessed by the director when assessing wrongful trading (see paras [93]; [366]).

Next Generation Holdings Limited & Anor v Alec Finch & Anor

[2026] EWCA Civ 1015 · 31 July 2026Interprets

Section 214 does not impose a direct duty on directors to stop an insolvent company trading or make such trading unlawful. It gives the court power to order a contribution only in the stated formal-insolvency circumstances. (see paras [35]; [40]-[41]; [57]-[59])

THG PLC & Ors v Zedra Trust Company (Jersey) Limited

[2024] EWCA Civ 158 · 23 February 2024

The court applied the reasoning that discretionary monetary relief recoverable only by virtue of a statutory provision falls within section 9. (see paras [99]-[103]; [121])

60 more judgments, and what each says about section 214, are in the case-law panel in the full Act.

Amendments and notes

19 notes from legislation.gov.uk

Amendments

  1. F457Words in s. 214(2)(b) inserted (1.10.2015) by Small Business, Enterprise and Employment Act 2015 (c. 26), ss. 117(3)(a), 164(1); S.I. 2015/1689, reg. 2(j) (with Sch. para. 15)
  2. F458Words in s. 214(3) substituted (1.10.2015) by Small Business, Enterprise and Employment Act 2015 (c. 26), ss. 117(3)(b), 164(1); S.I. 2015/1689, reg. 2(j) (with Sch. para. 15)
  3. F459S. 214(6A) inserted (1.10.2015) by Small Business, Enterprise and Employment Act 2015 (c. 26), ss. 117(3)(c), 164(1); S.I. 2015/1689, reg. 2(j) (with Sch. para. 15)

Modifications

  1. C625Ss. 206-215 applied (with modifications) (4.1.2024) by S.I. 2021/716, Sch. 1 para. 3 (as amended by The Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023 (S.I. 2023/1399), regs. 1(2), 20)
  2. C660S. 214 modified (7.10.2008 at 9.30 a.m.) ) by The Heritable Bank plc Transfer of Certain Rights and Liabilities Order 2008 (S.I. 2008/2644), art. 26, Sch. 2 para. 3(a)
  3. C661S. 214 modified (29.9.2008 at 8.00 a.m.) ) by The Bradford & Bingley plc Transfer of Securities and Property etc. Order 2008 (S.I. 2008/2546), art. 13, Sch. 1 para. 3(a)
  4. C662S. 214 modified (22.2.2008) by The Northern Rock plc Transfer Order 2008 (S.I. 2008/432), art. 17(1), Sch. para. 3(a)
  5. C663S. 214 applied (with modifications) (S.) (6.4.2001) by S.S.I. 2001/128, reg. 4(1), Sch. 2
  6. C664S. 214 modified (30.3.2009 at 8.00 a.m.) by The Amendments to Law (Resolution of Dunfermline Building Society) Order 2009 (S.I. 2009/814), art. 7, Sch. 1 para. 3(a)
  7. C665S. 214 applied (with modifications) (6.6.2013) by The Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 (S.I. 2013/1388), Pt. 3 reg. 1, Sch. 2 paras. 3, 5 Table (with reg. 24)
  8. C666S. 214 excluded (1.3.2016) by The NRAM plc (formerly Northern Rock plc) Consequential and Supplementary Provisions Order 2016 (S.I. 2016/114), arts. 1(1), 7(1)(3), Sch. para. 2(a)
  9. C667S. 214 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 103, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 2 (as amended (7.4.2017) by S.I. 2017/400, regs. 1(2), 5(4))
  10. C668S. 214 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 145, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 3 (as amended (7.4.2017) S.I. 2017/400, regs. 1(2), 5(10))
  11. C669S. 214 modified (26.11.2020) by The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Suspension of Liability for Wrongful Trading and Extension of the Relevant Period) Regulations 2020 (S.I. 2020/1349), regs. 1, 2(1)(2) (with reg. 2(3)-(9))
  12. C670S. 214 applied (with modifications) (8.7.2021) by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), regs. 2, 37, Sch. 1 para. 3 (with reg. 5) (as amended (4.1.2024) by S.I. 2023/1399, regs. 1(2), 4, 11)
  13. C671S. 214 applied (with modifications) (E.W.) (15.3.2024) by The Water Industry (Special Administration) Regulations 2024 (S.I. 2024/205), regs. 2(2), 5(1) (with reg. 64)
  14. C672S. 214 modified (16.7.2026) by The Modification of the Law (British Steel Limited Property Transfer) Regulations 2026 (S.I. 2026/833), regs. 1(2), 6(2), Sch. para. 3
  15. C673S. 214(2) modified (S.) (6.4.2001) by S.S.I. 2001/128, reg. 4(2), Sch. 3
  16. C674S. 214(4) applied (6.4.2005) by The Pensions Regulator (Notifiable Events) Regulations 2005 (S.I. 2005/900), reg. 2(2)(c)