What characterizes wrongful trading?

Wrongful trading is primarily characterized by a situation where a company's directors continue to trade while knowing that the company is insolvent, and they fail to take the necessary steps to prevent the company from incurring further losses. In this context, option C aptly describes a scenario where an insolvent company is unable to avoid liquidation. This situation arises because the directors should recognize the financial distress and act in the best interest of creditors, potentially leading to claims against them for wrongful trading if they allow the company to take on additional liabilities when it is clear that it cannot pay.

By contrast, the other options do not correctly depict wrongful trading. A company knowing it will avoid liquidation suggests an awareness of financial stability, which contradicts the concept of insolvency. Furthermore, a director taking sufficient steps to minimize loss indicates proactive management and responsibility, which generally would not constitute wrongful trading. Lastly, promoting a solvent company implies that the directors are acting properly within their duties, therefore, it does not align with the characteristics of wrongful trading.