Insolvency Act 1986, section 213

Fraudulent trading

Part IV Winding Up of Companies Registered under the Companies Acts

(1)If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect.

(2)The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above-mentioned are to be liable to make such contributions (if any) to the company’s assets as the court thinks proper.

Definitions used in section 213 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
party

(3) In section 72B(1) and this paragraph “party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.2A para.1(3) · see it in the full Act

(4) “Party” to an arrangement includes a party to an agreement which—

(a)forms part of the arrangement,

(b)provides for the raising of finance as part of the arrangement, or

(c)is necessary for the purposes of implementing the arrangement.

Defined in Sch.ZA1 para.19(4) · see it in the full Act

Cases considering section 213 74

Bilta (UK) Ltd (in liquidation) and others v Tradition Financial Services Ltd

[2025] UKSC 18 · 7 May 2025Interprets

The subsection is the gateway to civil fraudulent-trading liability. It requires the company’s business to have been carried on with intent to defraud creditors or for a fraudulent purpose; an isolated fraud does not necessarily establish that condition. (see paras [24]–[25]; [47]) The subsection extends to outsiders who knowingly and dishonestly participate in, facilitate or assist fraudulent transactions constituting the company’s fraudulent business. It is not confined to persons managing or controlling the company, but requires active participation rather than a mere failure to advise. (see paras [24]–[29]; [36]; [58])

Jetivia SA and another v Bilta (UK) Limited (in liquidation) and others

[2015] UKSC 23 · 22 April 2015Interprets

The fraudulent-trading contribution power has extraterritorial effect and can apply to persons and corporations resident abroad. “Any persons” is not confined to persons in the United Kingdom. Sufficient connection with England remains relevant to service and the court’s discretion to grant relief (see paras [107]-[110]; [210]-[215]).

Tradition Financial Services Ltd v Bilta (UK) Ltd & Ors

[2023] EWCA Civ 112 · 10 February 2023Interprets

The provision is not limited to persons managing or controlling the company. An outsider may be liable by knowingly and actively furthering or facilitating the company’s fraudulent business, subject to a fact-sensitive assessment of participation. The business or a discrete part of it must itself have been carried on fraudulently. (see paras [107]–[120])

54 more judgments, and what each says about section 213, are in the case-law panel in the full Act.

Amendments and notes

6 notes from legislation.gov.uk

Modifications

  1. 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)
  2. C655S. 213 applied (with modifications) (S.) (6.4.2001) by S.S.I. 2001/128, reg. 4(1), Sch. 2
  3. C656S. 213 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
  4. C657S. 213 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)
  5. C658S. 213 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 145, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 3 (as amended (7.4.2017) by S.I. 2017/400, regs. 1(2), 5(10))
  6. C659S. 213 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)