Only those who were knowingly parties to the fraudulent trading are caught by this section. Case law has shown that it is not enough for fraudulent trading to show that the company continued to run up debts when the directors knew that it was insolvent; there has to be “actual dishonesty, involving, …, real moral blame”.
It is not only directors who may be liable for fraudulent trading. Anyone who is knowingly party to carrying on the business with intent to defraud may be liable for fraudulent trading. In the case of Bank of India v Morris the Court of Appeal held that a bank was a party to fraudulent trading by virtue of its employee’s knowledge.