Insolvency Act 1986, section 206

Fraud, etc. in anticipation of winding up

Part IV Winding Up of Companies Registered under the Companies Acts

(1)When a company is ordered to be wound up by the court, or passes a resolution for voluntary winding up, any person, being a past or present officer of the company, is deemed to have committed an offence if, within the 12 months immediately preceding the commencement of the winding up, he has—

(a)concealed any part of the company’s property to the value of [F451£500F451] or more, or concealed any debt due to or from the company, or

(b)fraudulently removed any part of the company’s property to the value of [F451£500F451] or more, or

(c)concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the company’s property or affairs, or

(d)made any false entry in any book or paper affecting or relating to the company’s property or affairs, or

(e)fraudulently parted with, altered or made any omission in any document affecting or relating to the company’s property or affairs, or

(f)pawned, pledged or disposed of any property of the company which has been obtained on credit and has not been paid for (unless the pawning, pledging or disposal was in the ordinary way of the company’s business).

(2)Such a person is deemed to have committed an offence if within the period above mentioned he has been privy to the doing by others of any of the things mentioned in paragraphs (c), (d) and (e) of subsection (1); and he commits an offence if, at any time after the commencement of the winding up, he does any of the things mentioned in paragraphs (a) to (f) of that subsection, or is privy to the doing by others of any of the things mentioned in paragraphs (c) to (e) of it.

(3) For purposes of this section, “officer” includes a shadow director.

(4)It is a defence—

(a)for a person charged under paragraph (a) or (f) of subsection (1) (or under subsection (2) in respect of the things mentioned in either of those two paragraphs) to prove that he had no intent to defraud, and

(b)for a person charged under paragraph (c) or (d) of subsection (1) (or under subsection (2) in respect of the things mentioned in either of those two paragraphs) to prove that he had no intent to conceal the state of affairs of the company or to defeat the law.

(5)Where a person pawns, pledges or disposes of any property in circumstances which amount to an offence under subsection (1)(f), every person who takes in pawn or pledge, or otherwise receives, the property knowing it to be pawned, pledged or disposed of in such circumstances, is guilty of an offence.

(6)A person guilty of an offence under this section is liable to imprisonment or a fine, or both.

(7)The money sums specified in paragraphs (a) and (b) of subsection (1) are subject to increase or reduction by order under section 416 in Part XV.

Definitions used in section 206 2

the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act
a resolution for voluntary winding up

(2) In this Act the expression “a resolution for voluntary winding up” means a resolution passed under either of the paragraphs of subsection (1).

Defined in s.84(2) · see it in the full Act

Cases considering section 206 6

Druzyc, R. v

[2019] EWCA Crim 1076 · 11 June 2019

The court treated the 12-month period before commencement of winding-up as an essential element of the offence of fraudulent removal of company property. Transfers made about 18 months before that date could not prove the charged offence, rendering the conviction unsafe (see paras [29]-[32]).

Taylor v R.

[2011] EWCA Crim 728 · 25 March 2011Interprets

The court gave the composite expression “book or paper” a practical meaning applicable to current circumstances. Electronic company records affecting company property or affairs fell within it, so the conviction for falsification could stand (see paras [21]-[25]).

Bezant v Rausing & Ors

[2007] EWHC 1118 (QB) · 14 May 2007Limits

Held not to ground a private damages action because the provision creates a criminal offence (see paras [116]-[123]).

What each judgment says about section 206 is in the case-law panel in the full Act.

Amendments and notes

7 notes from legislation.gov.uk

Amendments

  1. F451“£500" substituted by virtue of S.I. 1986/1996, art. 2(1), Sch. Pt. I

Modifications

  1. C621S. 206 applied (with modifications) (S.) (6.4.2001) by S.S.I. 2001/128, reg. 4(1), Sch. 2
  2. C622S. 206 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 103, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 2
  3. C623S. 206 applied (with modifications) (6.6.2013) by The Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 (S.I. 2013/1388), Pt. 3 reg. 1, Sch. 2 paras. 3, 5 Table (with reg. 24)
  4. C624S. 206 applied (with modifications) (8.7.2021) by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), regs. 2, 37 (with reg. 5) (as amended (4.1.2024) by S.I. 2023/1399, regs. 1(2), 4, 11)
  5. C625Ss. 206-215 applied (with modifications) (4.1.2024) by S.I. 2021/716, Sch. 1 para. 3 (as amended by The Payment and Electronic Money Institution Insolvency (Amendment) Regulations 2023 (S.I. 2023/1399), regs. 1(2), 20)
  6. C626S. 206(1) modified (temp.) (retrospective to 27.4.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), Sch. 10 paras. 8(1)(2), 11 (with ss. 2(2), 5(2))