Section 673 CAMA 2020
Section 673 Companies and Allied Matters Act is about Wrongful trading. It is under Chapter 24 (Provisions applicable to every mode of winding-up) of the Act.
(1) Subject to subsection (3), if, in the course of the winding-upof a company, it appears that subsection (2) applies in relation to a person whois 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 deems 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, and (c) that person was a director of the company at that time.
(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 (assuming him to have known that there was no reasonable prospect that the company would avoid going into insolvent liquidation) 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 performed in relation to a company by a director of the company includes any function which he does not perform but which has 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.
