practitioner. All directors who continue as directors of a company trading while insolvent may face disqualification under the Company Directors Disqualification Act 1986. Under the provision of this act, when a company goes into liquidation, the liquidator must make a report to the Disqualification Unit of the Department for Business, Innovation and Skills on the conduct of all directors. Many legal systems (including English law) recognise the blue sky defence; which broadly provides that, if the directors, in good faith, believed the company was about to turn the corner and improve, they would not normally be held liable for continuing to trade. Liability only attaches when the company has no realistic prospect of avoiding insolvent liquidation. The amount of the award The Court has wide discretion over the contribution that it can require. Traditionally this has been compensatory, rather than punitive. The starting point for assessing the appropriate amount was the difference between the net assets of the company at the date that the directors should not have traded beyond, and the net assets at the date of liquidation. The Court however has wide discretion, and may award just a percentage of this. It awarded 70% of the drop in net assets in Re Brian D Pierson (Contractors) Ltd [1999] BCC 903. This was on the basis of the judge's "guesstimate" that 70% of the drop in net assets was due to the actions of the directors, and 30% could be attributed to extraneous causes. Barriers to wrongful trading actions It was thought prior to 1997 that the amount paid by a director following a wrongful trading claim was simply paid to the liquidator and it became available to swell the assets of the company generally. In most instances there would have been substantial bank borrowings secured by a debenture and personal guarantees given by the directors. Many directors chose not to fight the claims, reasoning that any amounts paid to company (hence the bank under its mortgage security) via a wrongful trading claim, simply reduced the director's liability under their personal guarantees. It was therefore irrelevant how the directors repaid the bank. This changed with the Court of Appeal's decision in 1998 that a claim for wrongful (or fraudulent) trading, is different from a normal 'asset' of the company. In particular, it held that such claim cannot be secured by a debenture. The Court held that the fruits of