Transactions that place assets beyond the reach of creditors: El-Husseiny v Invest Bank PSC 2025 UKSC 4

The unique statutory provision that is section 423 of the Insolvency Act 1986, 1 offering redress to creditors that have been, or potentially will be, prejudiced by fraudulent transactions entered into by the debtor, has recently been the subject of interpretation by the Supreme Court in El-Husseiny v Invest Bank. 2 This asset recovery provision is not strictly confined to insolvency situations. 3 The core issue before the Supreme Court was whether the term ‘transaction’ in section 423 applied to a situation where a debtor procures a company which he owns to transfer a valuable asset for no consideration or at an undervalue which diminishes or eliminates the value of his shares in the company, or whether the provision required the debtor to personally own and transfer the asset in question. 4 This was a preliminary matter that was found against the debtor in the Court of Appeal which enabled the substantive trial to proceed. While the substantive trial decided that other elements in section 423 were not met, the Supreme Court acknowledged that the parties did not seek to stop it from rendering its judgment, and that in any case the issue was of sufficient importance for it to proceed. 5