Which term refers to the act of trading with the knowledge of insolvency?

The act of trading with the knowledge of insolvency is specifically known as "wrongful trading." This term refers to a situation where company directors continue to trade that company while aware that it is insolvent, which can lead to significant consequences for the directors involved. Under laws governing corporate conduct, such as those applicable in several jurisdictions, directors have a fiduciary duty to act in the best interests of the company and its creditors. If they fail to do so by continuing to operate the business despite knowing it cannot meet its liabilities, they can be held personally liable for the debts incurred during this period.

This concept is crucial because it underscores the responsibilities that directors have and aims to protect creditors by discouraging irresponsible trading practices. In contrast to other options, such as "insolvent trading," which focuses on the trading activity itself without the element of awareness, "wrongful trading" specifically captures the knowledge aspect that elevates the seriousness of the act and allows for legal repercussions for those involved.

Other terms like "deceptive trading" and "negligent trading" have different implications and do not directly relate to the specific awareness of insolvency that constitutes wrongful trading. Therefore, understanding this key distinction is essential in business law, particularly in terms of