The ruling confirmed that Section 423 of the Insolvency Act 1986 has extensive international reach, and does not require a transaction at an undervalue to leave the debtor with insufficient assets.
By Simon J. Baskerville, Oliver E. Browne, Jessica Walker, Daniel Smith, and Chris Attrill
The English High Court has held that a creditor pursuing a claim under Section 423 of the Insolvency Act 1986 (s. 423) does not need to prove that the debtor has insufficient assets to meet their claim following the disputed transaction. The ruling rejected a potential “gateway” condition that would have limited the scope of s. 423, and confirmed its broad international reach. S. 423 remains a powerful tool for creditors to challenge transactions at an undervalue, even outside insolvencies, and even in relation to assets outside the jurisdiction of the English court.
Although this case concerns individuals, the ruling provides a helpful reminder to creditors that s. 423 can be used in the English court to seek financial remedies and related relief if a debtor has an obligation to pay the claimant but enters into a “transaction at an undervalue” to put assets beyond their reach or to prejudice the creditor’s interests.
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