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Owing to the full range of conduct embraced by this offence, this is an increasingly popular charge for Prosecutors challenging Company Owners & Directors. Fraudulent trading involves the carrying out of a business with the intention of defrauding creditors or any other person for any fraudulent purpose.
This charge will typically be made after a company is wound up. Often the business has failed, and at the core of the charge, the facts are that it may well be down to bad management rather than criminal intent.
For the person accused or charged with fraudulent trading, it can be very alarming. They will wonder if they will be imprisoned and what that may do to their relationships and familial bonds. Will they be expected to pay a hefty fine that will leave their dependents in a financial predicament of not being able to afford a mortgage or rent payments, food and utility bills, let alone live the life to which they may have grown accustomed.
To help you to understand what the outcome might be as a result of being convicted fraudulent trading, we’ve detailed the sentencing guidelines below. Please note that a competent and experienced solicitor may be able to get any prison sentence reduced or even avoid it entirely.
If you or somebody close to you has been charged or arrested in connection to fraudulent trading, you will probably be feeling very stressed, confused, worried and concerned about what’s going to happen.
It’s vital that you take the guidance of an experienced and competent fraud solicitor. They will ideally be able to view the financial records of the business. It’s likely that a forensic accountant is given the role of drafting a report to provide support to the defence.
It’s possible that the directors of the business were looking to ensure that the business survived and therefore made some wrong judgements and decisions. The managers may not have been aware of the financial position of the company and the inability to pay. They may have been naïve about the potential of the business with regards to growth.
Many entrepreneurs are overly optimistic about their business and they may have overspent, hoping that they would be able to reclaim the expenditure through sales. Only when these decisions are taken dishonestly can they be accused of fraudulent trading.
Investigations into fraudulent trading will often be instigated by the police or other government agencies such as the Organised Crime Agency receiving complaints by creditors who have lost money. Typically, a business will stop trading; it will disappear altogether or go into liquidation leaving debts that need to be paid. In some cases, failed businesses will simply have continued to trade and buy on credit accounts when they should have brought their operations to a halt.
In some cases, a business will have been set up purely to defraud; this is known as ‘long firm fraud’. These businesses will typically buy electronic products or white goods that they can quickly and easily sell. They may create credit accounts that they initially maintain so as to build trust. They will then buy large quantities of goods and then disappear.
There is also the ‘short firm fraud’ situation where a business won’t even attempt to build trust, they will immediately buy as much as they can using credit and then disappear with the goods.
Depending on what you are charged with, the maximum sentence for this offence is ten years in prison. For offences that took place before January 15th, 2007, the maximum sentence will be seven years.
The maximum sentences will only be issued when there has been reckless and blatant offending that involves a large amount of money. When it comes to smaller offences, a sentence is likely to be between one and three years.
Here are the guidelines that judges, and magistrates are given to decide what sentence to give.
The level of culpability is determined by weighing up all the factors of the case to determine the offender’s role and the extent to which the offending was planned and the sophistication with which it was carried out.
Where there are characteristics present which fall under different levels of culpability, the court should balance these characteristics to reach a fair assessment of the offender’s culpability.
Harm is initially assessed by the actual, intended or risked loss as may arise from the offence.
The values in the table below are to be used for actual or intended loss only.
Intended loss relates to offences where circumstances prevent the actual loss that is intended to be caused by the fraudulent activity.
Risk of loss (for instance in mortgage frauds) involves consideration of both the likelihood of harm occurring and the extent of it if it does. Risk of loss is less serious than actual or intended loss. Where the offence has caused risk of loss but no (or much less) actual loss the normal approach is to move down to the corresponding point in the next category. This may not be appropriate if either the likelihood or extent of risked loss is particularly high.
|Harm A – Loss caused or intended|
|Category 1||£500,000 or more||Starting point based on £1 million|
|Category 2||£100,000 – £500,000 or Risk of category 1 harm||Starting point based on £300,000|
|Category 3||£20,000 – £100,000 or Risk of category 2 harm||Starting point based on £50,000|
|Category 4||£5,000 – £20,000 or Risk of category 3 harm||Starting point based on £12,500|
|Category 5||Less than £5,000 or Risk of category 4 harm||Starting point based on £2,500|
When sentencing for fraudulent trading, your case will be investigated thoroughly by the police and other regulatory agents.
It will be looked at for whether you have taken part in a group activity or to see if you were forced into it. If you’ve used a false identity, or you have used the identity of others to access more funds, this will be considered to decide your sentence.
Certain aspects of a case are known as the mitigating aspects which can influence the sentence that a judge gives. One of the factors judges consider in every case of this nature is the defendant’s level of genuine remorse.
The following are some of the other factors considered when the court decides which sentence to give. They will look at:
In recent years, several changes have been made to the sentencing system in the UK to save the court time and cost and to protect witnesses from the stress of needlessly going through a trial. For offenders aged 18 and over, pleading guilty early on in a case can reduce a sentence by as much as one third (maximum). The later the plea is entered, the smaller the reduction.
‘Early on’ refers to ‘the first stage of the proceedings’ and means anytime up to and including the first hearing at the Magistrates Court or Crown Court for indictable offences.
If a plea is entered 14 days after the first hearing, for example, the maximum level of reduction is just 20% or one fifth of the sentence. For indictable offences, the limit for a guilty plea to be made is within 28 days after the prosecutor has stated compliance with section 3 of CPIA 1996 and serving disclosure; although the decision is ultimately in the hands of the Judge who has discretion to apply whatever credit is deemed appropriate.
After these times there is a sliding scale of credit applied. This goes down to one tenth on the first day of the trial and to zero if entered during the course of the trial. In theory, the ten percent could be given if the plea is issued after the opening speeches on the first day, but prior to any witness evidence being heard.
If the accused does not want to plead guilty, then it’s important for the solicitor to regularly inform the court throughout the trial of the reasons why the client’s plea is not guilty.
A court can also make ancillary orders on a defendant if they are found guilty and convicted of a fraudulent trading offence. These are extra elements of punishment that can be added to a sentence and include additional restrictions or requirements that can affect a dependent’s finances, your property or business or financial activity.
Ancillary orders that are typically added to the penalty for those who are found to be guilty of fraudulent trading include:
As part of your investigation, you may also have your assets frozen with the possibility of having cash or other assets seized.
In addition, the court may demand payment of the following if the accused is convicted:
Payment of costs applied for by the prosecutors
Although the police meet some of the costs involved in the prosecution, the costs of investigation are typically sought from the convicted. These may include the costs of:
The term victims’ surcharges can be explained as paying compensation to a fund for victims and can range between £20 to £170 depending on what sentence you were given at conviction.
There are several national databases that hold information about individuals and any allegations made about them, their criminal and court records. These include the DBS (Disclosure and Barring Service) which was previously known as the CRB (Criminal Record Bureau) and the Police National Computer (PNC). Depending on what happened, whether the accused is convicted and what sentence was issued, the accused may be added to one or all these databases. Their purpose is to provide information to potential employers and to regulate the ability to take part in certain activities.
If your case progresses to court and you are convicted of fraudulent trading, your conviction will be noted on your CRB / police record. The period of the endorsement will depend on the nature and length of your sentence.
Below are details on how long you will be listed as holding a criminal record if convicted. This is something very serious to consider when it comes to future employment. The term ‘spent’ refers to when your name can be removed from the databases.
(the time it takes for the sentence to become ‘spent’)
|Sentence||Adult (aged 18+) at time of conviction||Young person (aged under 18) at time of conviction|
|Prison sentences of more than 4 years||Sentence is never spent||Sentence is never spent|
|Prison sentences of more than 2.5 years (30 months) but less than 4 years||Sentence length 7 years||Sentence length 3.5 years|
|Prison sentences of more than 6 months but less than 2.5 years (30 months)||Sentence length +4 years||Sentence length +2 years|
|Prison sentences of less than 6 months||Sentence length + 2 years||Sentence length +18 months|
|Conditional Discharge||Length of order||Length of order|
|Conditional Caution||3 months||3 months|
|Simple Caution / Youth Caution||None – immediately ‘spent’||None – immediately ‘spent’|
|Other Including Compensation Order, Supervision Order, Bind Over, Hospital Order||Length of the order / once compensation is paid||Length of the order / once compensation is paid|
Proving intention of fraudulent trading is the duty of the prosecutors who are absent of the exact knowledge of the nature of your business and its daily affairs.
To defend you, we will explore the circumstances surrounding your case thoroughly and always seek to protect on the front foot. We will work with you to understand the activities of your business, speak to those who will positively affirm your case and trawl through your records to identify material which will help present your case in your favour. Our fraud lawyers will create a defence strategy to fight your case and collect evidence, witness statements and other material which will support your account of the events.
If your bank accounts have been restricted with Restraint Orders or Freezing Orders, we will act promptly to defend your position and remove the encumbrances which could signal the demise of your business. Rest assured we have access to the best Barristers and QCs, forensic accountants, scientific analysts and a huge range of business-related experts who can be called upon to work with us.
Our fraudulent trading solicitors will advise on the potential impact on your family members, employees or acquaintances. If money was transferred to any other person, absent credible commercial reasons, our Fraud Solicitors will be able to advise on any Money Laundering implications and those affecting your standing with HMRC and Tax Evasion issues.
Our Fraud Solicitors can help
When you are involved in a case of this nature, it’s critical that fraud solicitors examine the background of the case. This will aid the legal team in building a strong defence for the client to be used during the trial. It will mean looking through your business transactions, bank records and receipts.
Getting to know the client well can make all the difference in being able to represent the client fairly and well. Being able to sell the client to the jury can influence the emotions of the jury. If they like the client, they are far more likely to be lenient with their judgement of the client. They may view the client as being naïve rather than dishonest, and then find them not guilty.
Arrest & Interview
At the outset of an investigation of this nature, it is commonplace for the police to seize all of your electronic devices for analysis. We understand you will feel a sense of embarrassment with such levels of intrusion into your privacy. They may be seized for weeks, months and sometimes even longer.
In this day and age where people rely heavily upon technology, we understand you may feel at a loss without them. Not only can our team prepare you for what can be a lengthy and gruelling process, once the investigation is underway, but we can also put pressure on the police to conclude their investigation as quickly as possible. Our fraud solicitors provide representation throughout police interviews and at all stages of the Court process.
If you’d like to have a no-obligation chat with us before you instruct us to take your case, then call us today.
In addition to giving you a free consultation, we can also represent you at the police station if you’ve been arrested. We can look at securing your legal aid.
Please Contact Us and ask to speak to our fraudulent trading lawyers and fraud solicitors to arrange a meeting in person, online or by telephone. If you prefer, you can WhatsApp us from the link you will find at the bottom banner if you open this page on your mobile phone device.
Get in touch with us now for possession of fraudulent trading legal help.