Fraudulent trading claims under sections 213 and 246ZA of the Insolvency Act 1986
Fraudulent trading claims under sections 213 and 246ZA of the Insolvency Act 1986

The following Restructuring & Insolvency guidance note provides comprehensive and up to date legal information covering:

  • Fraudulent trading claims under sections 213 and 246ZA of the Insolvency Act 1986
  • What is fraudulent trading?
  • Who can commence a fraudulent trading claim and against who?
  • What needs to be established to bring a successful fraudulent trading claim?
  • How is a claim brought and what needs to be set out?
  • Relief the court may grant on a successful fraudulent trading application

A fraudulent trading claim arises under two separate statutory routes. First, fraudulent trading is a criminal offence under section 993 of the Companies Act 2006 (CA 2006). Secondly, a civil remedy arises under sections 213 and 246ZA of the Insolvency Act 1986 (IA 1986). This Practice Note deals only with the latter.

What is fraudulent trading?

Fraudulent trading is a claim which arises under IA 1986, s 213 (liquidation) or IA 1986, s 246ZA (administration) and seeks to recover property to the company's assets where:

  1. the company has been wound up or entered administration, and where

  2. the business of the company was carried on with the intent:

    1. to defraud its creditors, and/or

    2. to defraud creditors of any other person(s)/business, and/or

    3. for any other fraudulent purpose(s)

Each of these constituent elements of a fraudulent trading claim is set out further below.

The ability of an administrator to bring a fraudulent trading claim has only existed since 1 October 2015 with the coming into force of section 117 of the Small Business, Enterprise and Employment Act 2015 (SBEEA 2015) which enacted IA 1986, s 246ZA.

Aside from contextual differences, the wording of IA 1986, s 213 and 246ZA is the same. Accordingly, it appears likely that the decisions concerning fraudulent trading claims brought under IA 1986, s 213 will apply equally to claims brought under