Which of the following statements regarding s.214 Insolvency Act 1986 (Wrongful Trading) is CORRECT?

Section 214 of the Insolvency Act 1986 addresses the concept of wrongful trading, which occurs when the directors of a company allow it to continue trading while knowing that there is no reasonable prospect of avoiding insolvency. To hold a director liable for wrongful trading, the liquidator must demonstrate that the director knew, or ought to have known, that the company was unable to avoid going into liquidation due to its financial position.

This requirement is crucial as it establishes a standard of knowledge and responsibility on the part of the directors, which is aimed at discouraging them from allowing a company to incur further debts when they should realistically recognize that the company is insolvent. Thus, option C accurately reflects this legal standard.

The other statements do not align with the necessary conditions for establishing wrongful trading. For instance, it is not required for the liquidator to prove that a person was both a director and shareholder, nor is it essential to demonstrate that fraud occurred. Additionally, the liquidator does not have to show that the person provided professional advice to directors; the focus remains instead on their awareness of the company's financial difficulties at the time trading continued.