Transactions defrauding creditors—claims under section 423 of the Insolvency Act 1986


Published by a ÑÇÖÞÉ«ÇéÍø Restructuring & Insolvency expert
Practice notes
In-house

Transactions defrauding creditors—claims under section 423 of the Insolvency Act 1986


Published by a ÑÇÖÞÉ«ÇéÍø Restructuring & Insolvency expert

Practice notes
In-house
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Section 423 of the Insolvency ACT 1986 (IA 1986) allows for the avoidance of Transactions which were designed to Defraud creditors. Its provisions are intended to prevent parties from disposing of assets so as to frustrate creditors.

A claim can be brought under IA 1986, s 423 against a company or individual following a transaction at an undervalue (TUV) which was undertaken with the purpose of putting assets beyond the reach of creditors.

While there are similarities with a TUV under IA 1986, s 238 (in the context of corporate insolvency) and IA 1986, s 339 (in the context of personal insolvency), these are the key differences:

  1. •

    recovery under IA 1986, s 423 does not necessarily involve formal insolvency proceedings

  2. •

    the purpose of the transaction is key under IA 1986, s 423, whereas the purpose of the transaction under IA 1986, ss 238 and 339 is not relevant

  3. •

    under IA 1986, s 423, there is no requirement for the debtor to be insolvent at the time

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Jurisdiction(s):
United Kingdom
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Key definition:
Transaction definition
What does Transaction mean?

The purchase, sale, subscription or underwiting of a particular investment

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