Section 423 transactions involving company assets

Factual background

The issue arose in proceedings commenced by the High Court in July 2021 to enforce judgments previously obtained in Abu Dhabi by Invest Bank PSC against Mr Ahmad El-Husseini. The Bank identified valuable assets in this jurisdiction against which it wished to enforce those judgments. It alleged that Mr El- Husseini had arranged for these assets to be transferred to other people in order to put them beyond the reach of the Bank and its judgment debt or to reduce the value of the companies which owned them. The Bank sought relief under section 423.

Issue

The central issue was section 423 transactions involving company assets.

Procedural history and reasoning

in July 2021 to enforce judgments previously obtained in Abu Dhabi by Invest Bank PSC against Mr Ahmad El-Husseini. The Bank identified valuable assets in this jurisdiction against which it wished to enforce those judgments. It alleged that Mr El- Husseini had arranged for these assets to be transferred to other people in order to put them beyond the reach of the Bank and its judgment debt or to reduce the value of the companies which owned them. The Bank sought relief under section 423. [2025] UKSC 4 KEY TAKEAWAYS: A “transaction” within section 423(1) of the Insolvency Act 1986 is not confined to a dealing with an asset owned by the debtor. 1. Capacity Point - A debtor does not “enter into a transaction” for the purposes of s423 when all his actions are carried out in his capacity as a director or other organ of the company which owns and transfers the relevant assets (basis of final appeal). 2.

Beneficial Interest Point - The fact that the relevant assets were not legally or beneficially owned by the judgment debtor but instead controlled by him did not in law prevent the transfer from falling within the scope of s423 (not part of final appeal). 3. Both the language and purpose of s423 point clearly to the provision applying to a transaction whereby a debtor agrees to procure a company which he owned to transfer a valuable asset for no consideration or at an undervalue. 4. FIRST INSTANCE HIGH COURT Andrew Baker J Determined two points of law relating to the interpretation of section 423: Beneficial Interest Point The fact that the relevant assets were not legally or beneficially owned by the judgment debtor but instead by a company owned or controlled by him did not in law prevent the transfer from falling within the scope of s423. Capacity Point A debtor does not “enter into a transaction” for the purposes of s423 when all his actions are carried out in his capacity as a director or other organ of the company which owns and transfers the relevant assets.

FIRST APPEAL COURT OF APPEAL Singh LJ, with whom Males LJ and Popplewell LJ agreed Dismissed the Appellant’s appeal on the Beneficial Interest Point. Allowed the Bank’s appeal on the Capacity Point. FINAL APPEAL SUPREME COURT Lady Rose and Lord Richards, with whom the other Justices agreed Unanimously dismissed the appeal. THE COURT FOUND THAT BOTH THE LANGUAGE AND PURPOSE OF SECTION 423 POINT CLEARLY TO THE CONCLUSION THAT A “TRANSACTION” WITHIN SECTION 423(1) IS NOT CONFINED TO A DEALING WITH AN ASSET OWNED BY THE DEBTOR BUT EXTENDS TO THE TYPE OF TRANSACTION IN THIS CASE. THE SUPREME COURT FOUND IT USEFUL TO FOCUS ON ONE PARTICULAR TRANSFER AS A GOOD EXAMPLE: This is a transaction involving a property at 9 Hyde Park Garden Mews. For the purpose of the appeal, the Supreme Court assumed the following facts: Before 9 Hyde Park was transferred, it was legally and beneficially owned by a Jersey Company, Marquee Holdings Limited, and was worth about £4.5 million. At the time of the transfer, Mr El-Husseini was the beneficial owner of all the shares in Marquee.

Decision and key points

The Supreme Court held that section 423 of the Insolvency Act 1986 can apply where a debtor procures a company he owns to transfer an asset for no consideration or at an undervalue.

1. A transaction within section 423(1) is not confined to a dealing with an asset owned by the debtor.
2. A debtor acting solely as a company organ does not thereby enter the company’s transaction personally.
3. Section 423 can apply where the debtor agrees to procure an owned company to transfer a valuable asset for no consideration or at an undervalue.

Why this decision matters

The Supreme Court clarified that section 423 can engage where a debtor causes a company to transfer its own property. The ruling materially affects how claimants frame asset-recovery cases involving companies, controllers and structures used to place value beyond creditors' reach.

Particularly relevant to: Creditors, office-holders, fraud litigators, directors and asset-recovery teams.

Related practice areas

Civil fraud and asset recovery

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