The Supreme Court has determined a claim in fraudulent trading under s. 213 Insolvency Act 1986 is not limited just to those involved in or controlling the management of a company.
A relatively straightforward question was posed to the Supreme Court in this appeal. Could a person who is not a director, or involved in the management of a company in any way, still be liable in fraudulent trading? Yes, they could, was the unanimous answer.
The company in this case was a vehicle for MTIC fraud and had engaged in spot trading in carbon credits. Claims against Tradition Finance were pursued in both dishonest assistance and fraudulent trading. Transition Finance acted as a broker and was involved in some, but not all, deal chains. They made introductions knowing those parties were unlikely to be legitimate trading concerns and had no belief that they would be engaged in legitimate spot trades.
Under s. 213 Insolvency Act 1986, any person who is knowingly party to the carrying on of the business with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, may be liable to make a contribution to the company’s assets. Transition Finance argued this was limited to those who exercised management or control, not to those who assisted or contributed to the breaches of others. The Supreme Court held there was nothing in the wording of section 213 which limited its operation to insiders only, unlike Sections 212 and 214 which did. In doing so, the court confirmed anyone knowingly party to the company’s fraudulent trading is within the scope of Section 213. Far from limiting that to a director, it might include a supplier, broker or even professional advisor.
A further point the Supreme Court considered was limitation. The dishonest assistance claims were held to be time-barred, and the claimants unable to rely on a period of postponement whilst the company had been dissolved. However, the s. 213 claims were not time-barred - that claim only comes into existence once the company entered insolvent liquidation and the six-year period ran from that date.
Bilta (UK) Ltd (in liquidation) and others v Tradition Financial Services Ltd [2025] UKSC 18
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