Insolvency Act 1986, section 423

Transactions defrauding creditors

Part XVI Provisions Against Debt Avoidance (England and Wales only)

(1)This section relates to transactions entered into at an undervalue; and a person enters into such a transaction with another person if—

(a)he makes a gift to the other person or he otherwise enters into a transaction with the other on terms that provide for him to receive no consideration;

(b)he enters into a transaction with the other in consideration of marriage [F1199or the formation of a civil partnershipF1199] ; or

(c)he enters into a transaction with the other for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by himself.

(2)Where a person has entered into such a transaction, the court may, if satisfied under the next subsection, make such order as it thinks fit for—

(a)restoring the position to what it would have been if the transaction had not been entered into, and

(b)protecting the interests of persons who are victims of the transaction.

(3)In the case of a person entering into such a transaction, an order shall only be made if the court is satisfied that it was entered into by him for the purpose—

(a)of putting assets beyond the reach of a person who is making, or may at some time make, a claim against him, or

(b)of otherwise prejudicing the interests of such a person in relation to the claim which he is making or may make.

(4) In this section “the court” means the High Court or—

(a)if the person entering into the transaction is an individual, any other court which would have jurisdiction in relation to a bankruptcy petition relating to him;

(b)if that person is a body capable of being wound up under Part IV or V of this Act, any other court having jurisdiction to wind it up.

(5) In relation to a transaction at an undervalue, references here and below to a victim of the transaction are to a person who is, or is capable of being, prejudiced by it; and in the following two sections the person entering into the transaction is referred to as “the debtor”.

Cases considering section 423 270

El-Husseiny and another v Invest Bank PSC

[2025] UKSC 4 · 19 February 2025Limits

The section provides redress for transactions at an undervalue entered into with the required creditor-prejudicing purpose. Its scope is not confined to disposals of assets owned by the debtor (see paras [27]-[31]; [53]-[60]; [75]). A transaction at an undervalue includes an arrangement under which a debtor procures an owned company to transfer its asset without adequate consideration. The provision does not require a disposal of the debtor’s own property, but the transaction must affect assets available to meet creditors’ claims (see paras [33]-[37]; [53]-[60]; [75]). A debtor may enter into a transaction for no consideration by arranging to procure a company’s gratuitous transfer. The second limb is not confined to transactions sharing the proprietary characteristics of a gift (see paras [34]; [41]-[43]). The value exchanged under the arrangement is compared in money or money’s worth. A debtor’s undertaking to procure a company’s transfer is valuable consideration, and a reciprocal promise to pay the company may constitute consideration provided to the debtor (see paras [34]; [44]-[47]). The court’s remedial powers are broad, but their breadth cannot replace the logically prior requirement that the debtor entered into a qualifying transaction. Restoration may be made subject to compensation for value provided by a transferee (see paras [56]; [58]-[59]). The claimant must establish the debtor’s subjective purpose of putting assets beyond a claimant’s reach or otherwise prejudicing the claimant. That purpose informs, but does not dictate or replace, the separate transaction requirement in subsection (1) (see paras [27]-[28]; [36]-[37]; [57]-[60]). The reference to putting assets beyond a claimant’s reach is deliberately not limited to the debtor’s own assets (see paras [36]; [55]). An arrangement which reduces the value of a debtor’s shareholding by procuring a gratuitous transfer from the company is capable of prejudicing creditors within this provision (see para [36]). The provision defines a victim of the transaction as a person who is, or is capable of being, prejudiced by it (see para [29]).

AWH Fund Ltd v ZCM Asset Holding Company (Bermuda) Ltd

[2019] UKPC 37 · 29 July 2019

Section 423 was cited through Orexim as having extraterritorial reach. The Board also relied on the expectation that procedural rules would enable service out where a wide statutory power exists. (see paras [21]; [43])

TAQA Bratani Limited & Ors v Fujairah Oil and Gas UK LLC & Ors

[2025] EWCA Civ 1669 · 19 December 2025Interprets

The court contrasted section 423 with section 238. Section 423 may share the undervalue concept, but its subjective purpose requirement and broader non-insolvency setting do not make claims under the two provisions rise or fall together. (see paras [34]-[38]) The provision was used as the equivalent of section 238(4)(a) when considering the treatment of dividends as transactions providing no consideration. (see paras [45]; [78]-[79]) Section 423(3) was treated as imposing a subjective purpose test concerning prejudice to claimants or potential claimants. That requirement differs materially from the objective reasonable-belief inquiry under section 238(5)(b). (see paras [34]-[35])

250 more judgments, and what each says about section 423, are in the case-law panel in the full Act.

Amendments and notes

9 notes from legislation.gov.uk

Amendments

  1. F1199Words in s. 423(1)(b) substituted (5.12.2005) by Civil Partnership Act 2004 (c. 33), ss. 261(1), 263, Sch. 27 para. 121; S.I. 2005/3175, art. 2(2) (subject to art. 2(3)-(5))

Modifications

  1. C1228S. 423 applied (with modifications) by S.I. 1986/1999, art. 3, Sch. 1 Pt. II
  2. C1229S. 423 restricted by Drug Trafficking Offences Act 1986 (c. 32, SIF 39:1), s. 15(6)( a )(7)
  3. C1230S. 423 excluded (25.4.1991) by Companies Act 1989 (c. 40), ss. 154, 155, 165(1)(c); S.I. 1991/878, art. 2, Sch.
  4. C1231S. 423 modified (3.2.1995) by 1994 c. 37, ss. 32(5)(a), 69(2), Sch. 2 para. 5 (with s. 66(2))
  5. C1232S. 423 amended (1.12.2001) by 2000 c. 8, s. 375(1); S.I. 2001/3538, art. 2
  6. C1233Ss. 423-425 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
  7. C1234Ss. 423-425 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
  8. C1235S. 423 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)