Validation orders—dispositions of property after commencement of winding up

Produced in partnership with Karl Anderson of 4 Stone Buildings

Practice notes

Validation orders—dispositions of property after commencement of winding up

Produced in partnership with Karl Anderson of 4 Stone Buildings

Practice notes

This Practice Note gives guidance as to when it is necessary to apply for a validation order and the procedures to be followed.

Why might an application for a validation order need to be made?

Under section 127 of the Insolvency Act 1986 (IA 1986), any dispositions of property made by a company after the commencement of a winding up are void.

Examples of dispositions are:

•
payments out of a bank account; a bank will frequently freeze a bank account when it becomes aware of a winding-up petition, making it impossible to trade
•
payment of wages, salaries and other day-to-day expenditure by a company
•
sale of a company asset, such as a land transaction

It should be noted that it is irrelevant whether the disposition is for full market value or otherwise: it is still potentially subject to IA 1986, s 127.

Although IA 1986, s 127 prevents valid dispositions of the company’s property after the commencement of the winding up, this does not apply

Karl Anderson

Barrister, 4 Stone Buildings

Karl is a barrister with a broad commercial chancery practice. He is frequently instructed on matters relating to banking and finance, restructuring and insolvency, company law, civil fraud, and general commercial disputes. He often appears, both on his own and as part of a larger counsel team, in the High Court and the County Court.

Examples of recent reported cases include Autonomy Corporation Ltd v Lynch [2022] EWHC 1178 (Ch) and General Electric Company v AI Alpine US Bidco Inc [2021] EWHC 45 (Ch).

Karl is also a contributing editor to Zuckerman on Civil Procedure 4th Ed. (2021) (Sweet & Maxwell) and a contributor to Loose and Griffiths on Liquidators 9th Ed. (��ɫ��® 2019).

Jurisdiction(s):

United Kingdom

Key definition:

Validation order definition

What does Validation order mean?

An order of the court ratifying a disposition of property that is at risk of being rendered void, or which in the absence of an order would be void, pursuant to the rules which preserve the property of bankrupts and companies in compulsory winding up.

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