Contentious insolvency claims and office-holder remedies: a practical guide

What makes insolvency litigation different?

Contentious insolvency combines collective procedure with ordinary litigation. The office-holder may investigate and pursue rights belonging to the company, invoke statutory remedies created by the Insolvency Act 1986, or seek information and control of property needed to administer the estate. At the same time, creditors, directors, recipients of transactions and other respondents may dispute standing, insolvency, purpose, causation, valuation, limitation or the relief sought.

The commercial objective should be identified before a claim is framed. A legally available remedy may still be unattractive if the defendant has no recoverable assets, the evidence is weak, the claim duplicates another cause of action or the cost and delay will diminish the estate. Conversely, prompt use of investigatory and interim powers may preserve value that would otherwise disappear.

Read the Insolvency Act 1986 on legislation.gov.uk →

The initial investigation

A disciplined investigation should identify the company's financial trajectory, decision-makers, transactions, counterparties and available records. The exercise is not merely to find questionable conduct: it is to establish the elements of a viable claim and the evidence required to prove loss and remedy.

1. Establish the relevant insolvency process, appointment, standing and any territorial or recognition issue.
2. Secure accounting records, bank material, board documents, contracts, electronic communications and data held by third parties.
3. Build a transaction and solvency chronology, distinguishing cash-flow difficulty from balance-sheet insolvency and the later prospect of unavoidable insolvency.
4. Identify company claims separately from statutory office-holder claims and claims belonging personally to creditors.
5. Test limitation, knowledge, concealment, assignment and procedural requirements before committing estate resources.
6. Investigate the respondent's assets, insurance, third-party involvement and practical ability to satisfy an order.
7. Record the funding, proportionality and creditor-benefit analysis supporting the proposed course.

Claims against directors and those controlling the business

Section 212 provides a summary procedure for examining misfeasance or breach of fiduciary or other duty by an officer, liquidator or other person within the section. It does not create the underlying duty, so the applicant must still identify the duty, breach, loss and appropriate relief. The same conduct may support ordinary company claims for breach of duty, equitable compensation, restoration of property or an account.

Fraudulent trading under section 213 requires business to have been carried on with intent to defraud creditors or for a fraudulent purpose. Wrongful trading under section 214 addresses the period after a director knew or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation, subject to the statutory defence. The legal tests, available respondents and measure of contribution differ; serious allegations require a pleading and evidential foundation proportionate to their gravity.

Directors' duties also change in practical emphasis as financial distress deepens. In BTI 2014 LLC v Sequana SA [2022] UKSC 25, the Supreme Court confirmed that the company's interests include creditors' interests when the company is insolvent or bordering on insolvency, or insolvent liquidation or administration is probable. The content and weight of that consideration depend on the financial circumstances.

Official Supreme Court materials for BTI v Sequana →

Transactions at an undervalue and preferences

Sections 238 and 239 allow an office-holder to challenge certain pre-insolvency transactions. A transaction at an undervalue concerns a gift or transaction for no consideration, or consideration significantly less than the value provided by the company. A preference requires the company to have put a creditor, surety or guarantor into a better position on an insolvent liquidation than otherwise, influenced by the statutory desire to prefer. Connected-person rules affect the relevant period and evidential presumptions.

Valuation is often central. The court must identify the transaction, what each party gave and received, the relevant date and the proper evidential basis for comparison. For preferences, commercial pressure and the decision-making process may be critical to whether the required desire existed. Relief under section 241 is restorative and flexible, but the form of order must respond to the transaction and protect relevant good-faith interests.

Transactions defrauding creditors under section 423

Section 423 is not confined to formal insolvency and may be invoked by specified victims as well as office-holders. It applies to transactions at an undervalue entered into for the purpose of putting assets beyond the reach of a person who is making, or may make, a claim, or otherwise prejudicing that person's interests in relation to the claim. The prohibited purpose need not be the sole or dominant purpose, but it must be proved.

The court has a broad discretion under sections 423 to 425 to restore the position and protect victims. That flexibility makes the remedy powerful, but it does not remove the need to analyse purpose, value, causation, recipients and third-party protections. Case Digest No. 6 addresses the assessment of statutory purpose, while No. 20 examines the remedial discretion after a transaction at an undervalue.

Read Case Digest No. 6: section 423 purpose and appellate review → · Read Case Digest No. 20: section 423 remedies →

Asset recovery, tracing and third-party liability

Company property may be recoverable through proprietary claims, tracing, knowing receipt, dishonest assistance or claims against participants in a breach of duty. The claimant must distinguish ownership from a personal right to compensation and trace value through any substitutions. That distinction affects priority, limitation, available defendants and the response to insolvency in the recipient chain.

Recent Supreme Court authority illustrates the reach of fiduciary and knowing-receipt analysis where company property is dealt with dishonestly after liquidation. In Mitchell v Al Jaber [2025] UKSC 43, the Court addressed fiduciary responsibility and knowing receipt arising from the transfer of shares belonging to a BVI company in liquidation.

Official Supreme Court materials for Mitchell v Al Jaber →

Urgent relief and preservation

A strong underlying claim does not preserve assets by itself. Depending on the evidence and risk, an office-holder may consider freezing relief, proprietary injunctions, delivery-up orders, preservation or inspection of property, third-party disclosure, search relief or orders supporting foreign proceedings. Each remedy has its own threshold, safeguards and cross-undertaking consequences.

An application should identify the cause of action, the evidence of dissipation or interference, the assets and persons affected, full and frank disclosure obligations, and the practical form of order required. In Re IAHP Group Holdings Ltd; Bucknall v Rizvi [2025] EWHC 2069 (Ch), the court considered freezing and proprietary relief and the treatment of a capped cross-undertaking in office-holder litigation.

Read Case Digest No. 13: freezing relief and proprietary injunctions →

Evidence, disclosure and office-holder decision-making

Office-holders often inherit incomplete records, failed systems and conflicting accounts. Statutory information-gathering powers can assist, but they must be used for proper insolvency purposes. Before proceedings, the team should map missing records, identify custodians and decide whether informal requests, statutory examination, third-party disclosure or an application is proportionate.

Respondents are entitled to understand the case they must meet. Broad allegations assembled from gaps in company records do not reverse the burden of proof. The quality of the office-holder's investigation, document preservation, expert instructions and disclosure process may determine both merits and costs.

Winding-up petitions, disputed debts and validation orders

Not all contentious insolvency work is an office-holder claim. A creditor may petition to wind up a company unable to pay its debts, while the company may contend that the debt is genuinely disputed on substantial grounds, supported by a genuine cross-claim, or pursued through the insolvency jurisdiction for an improper purpose. Applications to restrain presentation or advertisement may require urgent determination.

After presentation, section 127 may render dispositions of company property void if a winding-up order is later made, unless the court orders otherwise. Validation applications therefore require clear evidence about the proposed payment or transaction, the company's position and why validation is consistent with creditors' interests generally. Alexander's practice includes contested petitions, restraint applications and urgent validation work for companies, creditors and affected parties.

See Alexander's successful High Court appeal in a contested winding-up petition →

Cross-border insolvency and foreign assets

Cross-border cases add questions of recognition, jurisdiction, applicable law, immovable property and coordination between courts and office-holders. English proceedings may depend on whether a foreign appointment is recognised, whether the common law or the Cross-Border Insolvency Regulations 2006 apply, and what assistance can properly be granted.

The Supreme Court's decision in Drelle v Servis-Terminal LLC [2026] UKSC 29 confirms that a qualifying final foreign money judgment can create an obligation capable of constituting a bankruptcy debt without first being recognised in separate English proceedings. Alexander appeared in the connected Court of Appeal proceedings, not in the Supreme Court. His wider experience includes acting as sole counsel for a provisional liquidator and subsequently the liquidator in cross-border recovery work arising from an alleged US$300 million Ponzi scheme, including recognition of the BVI liquidation by the DIFC Court.

Read Case Digest No. 28 and the official hearing materials → · View the FCI Markets matter summary →

Funding, assignment, settlement and recovery

Merits are only one part of the office-holder's decision. The team should consider available estate funds, creditor funding, litigation funding, after-the-event insurance, assignment and the effect of security or expenses on the net return. Any arrangement must be assessed for authority, conflicts, control, privilege, disclosure and benefit to the estate.

Settlement analysis should compare the provable claim and realistic remedy with enforcement risk, delay, evidential uncertainty and irrecoverable cost. A respondent may need equivalent analysis of insurance, contribution claims, asset exposure and the consequences of continuing proceedings. Early mediation can be effective once sufficient information has been exchanged and the parties understand the recovery economics.

Alexander's relevant experience

Alexander acts for office-holders, creditors, companies, directors and recipients of claims. His experience includes acting as sole counsel for provisional liquidators and liquidators in cross-border recovery proceedings; successfully defending two respondents at a ten-day High Court trial against liquidator claims exceeding £3 million; representing directors in claims exceeding £5 million; and substantial contested winding-up, fraud, asset-recovery and interim-relief work.

In Biscoe v Milner, Alexander successfully defended all claims against his two clients, including allegations of fraudulent trading, dishonest assistance and transactions at an undervalue. In Palmer and Powell v Challis, he represented three directors in liquidator claims involving historic records and contested disclosure; the proceedings resolved before trial after disclosure and case-management orders. These appearances are presented separately from decisions included only as legal research.

Explore contentious insolvency expertise · Read Biscoe v Milner and Alexander's role · View representative insolvency matters

Routes to instruction

Insolvency practitioners, solicitors, creditors, companies, directors, funders and overseas lawyers may instruct Alexander through Enterprise Chambers in London, Leeds and Bristol. Public Access enquiries are considered where the work is suitable for that route, subject to the regulatory requirements, conflicts, availability and formal acceptance.

Professional instructions · Public Access · Contact and clerking routes