A: No. Most companies encounter financial ups and downs and some do become insolvent before they recover. Often a recovery is effected without the need for any formal insolvency process to be employed and the outside world is never aware of the extent of the difficulties encountered.
What is an offence is for the directors to allow a company to continue trading while it is insolvent at a time when they ought to be aware that there is no prospect of the company avoiding an insolvent liquidation. This is called wrongful trading.
In such cases, if the overall position of the company’s finances deteriorates between the point at which the directors ought to have been aware that the company could not avoid insolvent liquidation and the time it actually goes into liquidation, a liquidator could make an application to the court for the directors to make a contribution towards the assets of the company.
However, if during this period the directors take steps to mitigate the loss to creditors and those steps are the steps that a prudent businessman would have taken, given the same set of circumstances, this could be the grounds of a successful defence against a wrongful trading action.
If your company is insolvent and you are concerned that it may go into insolvent liquidation, you should take professional advice from a licensed insolvency practitioner.