The Wrongful Trading procedure is not fit for purpose. The provisions have no influence on directors' decisions, as they are ineffective for holding directors liable to contribute to the losses suffered by creditors. Critically discuss.

This is a company law question

This is what I have so far:

The improper trading provisions of the Insolvency Act 1986 (IA86) are ineffective. The standard for unlawful trade is whether the director knew, or should have known, that the firm had no reasonable chance of avoiding insolvency at the time.

If the firm goes bankrupt, the director is responsible for contributing to the assets of the company for the benefit of the creditors. The exam, however, is ineffectual since it does not consider the directors' real decision-making process.

Furthermore, the test is retroactive, which means that directors may only be held accountable if the firm goes bankrupt afterwards. This implies that directors can take financial risks without fear of repercussions.

The existing unlawful trading standard is ineffective, and it should be replaced with one that considers the directors' real decision-making process. This would make it more difficult for directors to take financial risks with the firm and hold them more accountable for their decisions.