When it comes to Directors Disqualification, recent guidance from the English Court of Appeal sheds light on a crucial aspect: Section 423 of the Insolvency Act 1986. This deals with transactions defrauding creditors. This guidance is particularly relevant in cases where a debtor is suspected of transferring assets through corporate structures to evade creditor claims, including those from judgment creditors.
In simple terms, this section allows the court to intervene if a debtor makes a transaction that either undervalues assets or unfairly harms the interests of creditors. This can include transferring assets to keep them away from creditors. Help can be sought not only by insolvency professionals but also by those directly affected, such as judgment creditors.
Court of Appeal
A recent case before the Court of Appeal involved allegations that a Director had attempted to hide ownership of assets. Such as; real estate, shares, and cash, or had them transferred within the family to avoid creditors.
A key point of was whether assets held by a company, allegedly wholly owned or controlled by the director (debtor), could still be considered part of a transaction entered into by the debtor.
The Court of Appeal’s ruling clarified important legal aspects:
- Even if the asset in question isn’t directly owned by the debtor, they can still be held responsible for transactions involving it.
- If a debtor influences a company, they control to transfer an asset, it’s still seen as the debtor’s transaction, not just the company’s.
- Whether a debtor’s involvement in a wider plan to transfer assets via a controlled company counts as a transaction depends on the specific circumstances.
This decision emphasises that whether a transfer falls under a debtor’s responsibility hangs on individual case details. It also underscores the Act’s intention to prevent debtors from evading obligations by using their controlled companies as excuses and vehicles to move assets away.
If you are a Director facing disqualification for transactions defrauding creditors or anything else, it is advisable to seek professional guidance. Get in touch with our team today at info@iladvisory.co.uk or call us on 020 7692 8456.